UPS is steering its trademark brown trucks in a new direction, and investors aren’t too happy about it.
In its Q4 earnings report, the parcel delivery behemoth announced it would cut volumes with Amazon, its largest customer, by more than 50% by the second half of 2026. CEO Carol Tomé said in an earnings call that the deal would “rightsize our network.” If UPS kept things status quo with Amazon, it would “likely result in diminishing returns,” she added.
“Amazon is our largest customer, but it’s not our most profitable customer,” Tomé told analysts. “Its margin is very dilutive to the US domestic business.”
It was one of three “strategic actions” the company announced, which also included insourcing 100% of its SurePost product and $1 billion in related cost-saving measures. The changes “will put us further down the path to becoming a more profitable, agile and differentiated UPS,” Tomé said in a news release.
Looking forward to 2025, the company said it expects to bring in roughly $89 billion in revenue and achieve a 10.8% operating margin. That puts UPS about $6 billion behind investors’ expectations for the year, the Wall Street Journal reported. The newspaper also observed that UPS stock was down 14% as of Thursday morning.
If the year’s projections hold true, the company would finish with revenues down but a higher margin versus 2024. UPS reported nearly $91.1 billion in revenue last year, roughly flat compared with 2023, and a 9.8% operating margin, down from 10.9% the previous year.
It appears UPS is looking several miles down the road in its strategic rerouting. Some analysts agree the company could benefit from relying less on Amazon as a customer.
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