In essence: UPS Affirms: Robots Aren't Capable of Industrial Actions
UPS, the global delivery giant, is navigating through a tumultuous period, with several factors impacting its revenues and profits.
Recent developments, such as the break with Amazon and the sale of Coyote Logistics, have taken a toll on UPS's revenues, if not profits. The small package market, influenced significantly by tariffs, has also affected consumer buying habits.
Despite these challenges, UPS's Price to Sales (PS) ratio stands at a historically low 0.83. This could be seen as an opportunity for investors, with the current stock price of $82 considered a bargain price for positioning for an exciting future with the potential implementation of AI, robotics, and automation.
UPS's Q2 earnings plunged to a new depth at $84.28, marking a significant decline. In response, the company is making a strategic pivot to grow the U.S. margin. CEO Carol B. Tome has stated this intention.
The company is also in talks with robotics startup Figure AI to potentially use humanoid robots for tasks in their logistics network. This could be a game-changer, as logistics and delivery companies are on the cusp of a technological breakthrough with AI, drones, robots, and autonomous vehicles, which could potentially replace the human workforce.
However, UPS is not providing any forward-looking revenue or operating profit guidance, adding to the uncertainty. The company's cost savings initiative, "efficiency reimagined," is facing resistance from a strong union, another hurdle in UPS's path.
Q1 earnings avoided guidance due to trade policy uncertainty, and Q2 earnings were avoided entirely. Revenues in supply chain solutions were lower by 18.3%, primarily due to the divestiture of Coyote. In Q2, 64% of UPS's volume went through automated facilities, an increase from 60% in the same quarter of the previous year.
The US domestic segment's revenues in Q2 were down 0.8%, but this was partly offset by gains in the international segment. UPS has issues with increasing costs and declining margins, and decreasing revenues. These problems stem from the 2023 threats of strike action and the UPS Teamsters National Master Agreement 2023-2028, which increased wages and workforce size.
UPS, which began trading in 1999, is implementing a Driver Voluntary Severance Plan (DVSP), which offers full-time U.S. drivers a buyout. However, this initiative is costly and slow to implement.
Despite these challenges, the major risk for UPS seems to be a potential cut in the dividend. However, this is considered unlikely while cost savings initiatives are underway. The company's stock price of $82 has been significant in the past, acting as both a cap and support for the price.
One interesting note is that BMW, not UPS, has been in talks since 2025 with Figure AI to delegate tasks to humanoid robots in their logistics networks. Figure 02 of Figure AI has entered the BMW factory for such applications.
In conclusion, UPS is facing a complex set of challenges, but it is also embracing change and looking towards the future with technological innovations. Whether these efforts will be enough to turn the company's fortunes around remains to be seen.
