(UPS.N) announced a positive outlook for its 2026 revenue, exceeding analysts’ predictions.
During a presentation on Tuesday, UPS shared a strategic three-year plan that focuses on prioritizing parcels with higher margins and implementing aggressive cost-cutting measures.
Despite this optimistic forecast, UPS shares saw a decline of 8.2% in the afternoon trading session.
Analysts speculate this drop might indicate that the 2026 projections, including expected capital expenditures, did not meet investor expectations or raised doubts about the feasibility of these goals.
Matthew Young, an analyst at Morningstar, observed, “The shares were down … suggesting 2026 guidance was slightly worse than investor expectations (including anticipated capital spending) or the market is questioning that outlook.”
In response to a downturn in e-commerce demand post-pandemic, UPS plans to capitalize on its healthcare logistics operations and engagements with small- to medium-sized businesses to stimulate growth in volume and margins.
Carol Tomé, CEO of UPS, expressed optimism about the future, stating, “After coming off a difficult market in 2023, the small package industry is poised to return to growth in 2024 and beyond.”
The company is set to invest approximately $6 billion into a project named “Network of the Future.” This initiative aims to enhance automation across its facilities and incorporate robotics for packaging and sorting tasks.
CFO Brian Newman highlighted the expected benefits of these advancements, noting, “This will enable us to reduce our reliance on labor and drive the productivity flywheel, which should translate into about $3 billion in savings over 5 years with half of that by 2026.”
Earlier forecasts for 2024 had hinted at revenue figures below the expectations of Wall Street, attributed to diminished demand from sectors like retail, manufacturing, and high tech.
However, UPS’s revenue projections for 2026, ranging between $108 billion and $114 billion, stand well above the London Stock Exchange Group’s (LSEG) estimate of $102.12 billion.
The company also aims to achieve a consolidated adjusted operating margin growth of 13% by 2026.
Based in Atlanta, UPS anticipates its capital expenditures to total between $17 billion and $18 billion from 2024 to 2026, representing approximately 5.5% of its total revenue.