Wolfe Research cuts UPS on Amazon volume cuts and margin pressure

Investing.com -- Wolfe Research downgraded UPS to Peer Perform, warning that the company faces a challenging first half of 2026 as it continues to reduce Amazon-related business and confronts margin pressure.

Analyst Scott Group wrote that UPS “materially underperformed last year” due to headwinds including “paring of Amazon volumes, the elimination of de minimis and in-sourcing its SurePost product.”

Shares have rebounded 18 percent since the company’s third-quarter beat and improved fourth-quarter guidance, but Wolfe said the recovery may not last.

Group expects “1H:26 earnings to remain under pressure” as UPS pares more Amazon volumes while cost reductions lag, adding that international package results also face year-over-year pressure until the company laps the end of de minimis out of China in May.

Wolfe now expects calendar-2026 earnings to be flat to down year-on-year, noting that its estimate is “9% below Consensus.”

With valuation “back towards historical averages,” the firm said it is lowering its rating from Outperform to Peer Perform.

The firm expects peak volume and domestic margin pressure in the first half. Wolfe sees potential for margins to “inflect higher again in 2H” as cost reductions catch up and the new USPS Ground Saver agreement ramps, but still models “flat full-year Domestic margins.”

Group acknowledged that Wolfe could be wrong if parcel pricing remains strong or if a B2B rebound boosts results, adding that shares could outperform near-term if the Supreme Court rules against IEEPA tariffs.

You May Also Be Interested In

• Are we witnessing a fundamental or speculative rally in the S&P 500?
• SpaceX sets IPO price at $135 ahead of roadshow in break with Wall Street norms
• UK lawmaker Jess Asato sues Elon Musk’s xAI over deepfakes