UPS Stock Down 57% From Record: Is the 6.5% Yield a Buy Before Its Oct. 27 Report?

UPS shares closed Friday at $101.06, roughly where they began 2026 and about 57% below the all-time closing high of $232.11 set on Feb. 2, 2022. At that price, the $1.64 quarterly dividend works out to a yield of about 6.5%, a figure that puts unusual weight on what the company reports before the market opens on Tuesday, Oct. 27. That third-quarter report is the first full quarter since UPS finished shrinking the volume it handles for its largest customer, Amazon.

The Motley Fool analyst behind the piece argues the slide is not simply a market overreaction. Most of it tracks a drop in profit. In 2022 UPS earned $12.94 per share on an adjusted basis; management now expects about $7.22 for 2026, a decline of roughly 44%. Part of that was deliberate. In January 2025, UPS said it had reached an agreement in principle to cut that customer's volume by more than 50% by the second half of 2026. In late August, management said the cutback and the network redesign built around it had been completed in June.

The second quarter offered early evidence of what the cut was meant to accomplish. U.S. domestic revenue rose 6% from a year earlier even as average daily volume fell 3.3%, because revenue per piece jumped 9.3%. The segment's adjusted operating margin reached 8%, up from 7% a year before and from just 4% in the first quarter of 2026. Adjusted operating profit climbed 21% to around $1.2 billion.

Cost cutting is carrying much of that load. UPS said its network and efficiency programs delivered about $1.2 billion in benefits between January and June, and it expects roughly $3 billion for all of 2026. That leaves about $1.8 billion to arrive in the second half, more than the first half produced.

The third quarter is not expected to match the second. Management guided to roughly flat U.S. domestic revenue and an adjusted operating margin near 7% for the segment. That would still beat the 6.4% posted in the same quarter last year, and management expects the margin to average about 8.8% across the second half.

The earnings arithmetic is tighter than it first looks. First-half adjusted earnings were $2.82 per share, so hitting the full-year target requires about $4.40 from July through December, against $4.12 in the back half of 2025. But last year's third-quarter result of $1.74 included a $0.30 boost from a gain on the sale-leaseback of five properties. Strip that out, and second-half earnings must grow about 15%. A third-quarter figure below $1.74 would not by itself mean the plan is slipping.

Cash flow matters more for a stock yielding 6.5%. Management expects about $5.5 billion in free cash flow for 2026, including employee separation payments tied to its Driver Choice Program, against roughly $5.4 billion in dividends. Through June, UPS generated about $1.6 billion, so it needs around $3.9 billion in the remaining months. That would cover the roughly $2.7 billion in dividends still to be paid, though not by a wide margin.

On valuation, the shares trade at about 13 times expected 2027 earnings, versus about 19 times forward earnings for the S&P 500. The author calls the stock worth a look for income investors willing to wait for the turnaround to show up in cash flow, while acknowledging that one quarter could disappoint and that the dividend leaves little slack. Tuesday's report is the first test of the second-half forecast, with earnings progress and free cash flow the numbers to watch.