To The Moon

$United Parcel Service Inc(UPS)$ reports second-quarter results before the US market opens on July 28. The central issue is whether deliberately reducing low-margin Amazon deliveries can improve profitability despite lowering package volume.

UPS announced in January that it intended to eliminate as many as 30,000 positions and close 24 facilities during 2026 as it reduced Amazon volume by approximately one million packages per day. These changes followed extensive workforce and facility reductions during 2025. Reuters’ report on UPS’s restructuring explains the strategy.

The logic is straightforward: not every package creates equal value. Dense commercial deliveries, healthcare logistics and time-sensitive shipments can generate better margins than high-volume residential e-commerce packages. UPS is therefore attempting to maximise revenue and profit per package rather than total volume.

First-quarter revenue declined 1.6% to $21.2 billion, and adjusted earnings fell to $1.07 per share. However, domestic revenue per package increased 6.5%. Management retained its 2026 revenue target of approximately $89.7 billion and adjusted operating-margin target near 9.6%. Reuters’ first-quarter analysis provides the comparison.

The bullish case is that automation, facility consolidation and a better customer mix could eventually restore margin even if volume remains lower. Monday’s sharp decline in oil prices may also reduce transport costs, although fuel-surcharge mechanisms limit the immediate benefit.

The bearish risk is that cost reductions occur more slowly than Amazon volume disappears. Weak industrial activity, tariffs and changes to low-value import rules could further pressure shipments. UPS also faces stronger performance from FedEx, which recently surpassed it in market value.

UPS fell 1.6% to $112.95 on July 27 and closed near its $112.37 session low.

UPS Weekly Chart

$United Parcel Service Inc(UPS)$’s weekly chart is showing an early but still unconfirmed trend reversal after price moved above the long-running descending trendline and reclaimed the $108–$111 area, which now needs to hold as support. The stock is currently trading near $113, but it remains below the more important resistance band around $121–$124, where several prior rallies stalled; a decisive weekly close above that zone, ideally followed by a successful retest, would strengthen the breakout case and could open a move toward roughly $130–$135, with the mid-$140s as a secondary target.

Because the stock is still trapped beneath major resistance, chasing naked calls is not yet attractive. A cleaner setup would be a 60–90 DTE $120/$135 call debit spread entered only after a confirmed weekly close above $124, while a more conservative premium strategy would be a $105/$95 bull put spread if UPS pulls back and holds the reclaimed trendline. A weekly close back below approximately $105–$108 would weaken the bullish thesis and suggest that the breakout attempt has failed.

The evidence leans neutral before earnings. The strategic shift could improve profitability, but falling volume and restructuring execution create uncertainty. The outlook would become bullish if revenue per package and margins rise despite lower volume; it would turn bearish if package declines overwhelm cost savings. This is personal opinion for education and is not financial advice.

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Disclaimer: This article is for informational and educational purposes only and does not constitute financial, investment, or trading advice. The views expressed are personal opinions based on publicly available information and are subject to change without notice. Investors should conduct their own research and consider their financial situation, risk tolerance, and investment objectives before making any investment decisions. I do not guarantee the accuracy or completeness of the information presented.