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Written by Reuben Gregg Brewer for The Motley Fool->
United Parcel Service has been working on a turnaround for a long time.
The company expects the second half of 2026 to be the turning point.
United Parcel Service (NYSE: UPS) didn't have the best first quarter, with one-time events pushing earnings down to $1.07 per share in 2026 from $1.49 in 2025. Operating margin fell two percentage points. That isn't a particularly inspiring performance for a company in the middle of a multi-year turnaround. However, the company is still calling for the second half to be the inflection point.
There was definitely some bad news in the first quarter. But there was also some good news. For example, the company's cost-cutting efforts continue. It is successfully shifting its business mix away from low-margin/high-volume customers and toward more profitable customers. And efforts to modernize the business, despite material upfront costs, are progressing as planned.
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Notably, revenue per piece in the company's U.S. business rose 6.5% in the quarter, continuing a trend of improvement in this metric. This is important because the company generated less revenue, but that revenue was more profitable. That is exactly the outcome that management is looking to achieve with the turnaround. There is more work to be done, of course, but all of the signs still indicate that UPS is moving in the right direction. There's no reason to doubt management's projections for a stronger second half.
At this point, Wall Street is in a show-me mood with UPS. The stock is still down more than 50% from its 2022 high. And it is down nearly 20% so far in 2026, as of this writing, with a notable decline following its earnings announcement. Given high energy prices, which raise operating costs and have broader implications with regard to recession risks, the negativity is understandable.
However, investors who think long-term should probably focus more on the turnaround's progress, which remains generally positive. Moreover, the company hasn't backed away from supporting its dividend. So the lofty 6.8% yield continues to look safe.
In other words, buying UPS today could set you up for a lifetime of reliable dividends. That said, turnaround stories are only appropriate for more aggressive investors, and UPS is very clearly still in turnaround mode. If the second half upturn takes shape as expected, however, you could not only set yourself up with a lofty yield but also with capital appreciation potential if you buy today.
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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends United Parcel Service. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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