UPS says a projected rebound in parcel demand combined with an aggressive strategy for network consolidation and automation to reduce excess capacity and labor costs will drive double-digit profit margins by 2026. Up to 200 facilities are slated for closure over a five-year period.
The optimization plan, code-named Network of the Future, is expected to save $3 billion per year by 2028 through better productivity, according to a new strategic framework outlined by management on Tuesday. The leadership team explained why it is targeting premium segments such as health care and small businesses, as well as nearshoring trends, as big opportunities.
The event for investors was held in a massive new aircraft hangar at the delivery giant’s global air hub in Louisville, Kentucky, and streamed on the web.
UPS (NYSE: UPS) declared financial targets for 2026 include revenue of $108 billion to $114 billion — up from $91 billion last year — an adjusted operating margin above 13%, free cash flow of about $17.5 billion and capital spending of about 5.5% of total revenue.
Wall Street, which wanted $3 billion in reduced costs by 2026 instead of 2028, didn’t seem impressed. The company previously warned that operating profit would be down 20% to 30% year over year in the first half and then rebound to be up by the same amount in the second half as the wage growth rate from the new Teamster contract eases. UPS’ share price fell 8% by Tuesday’s close, but recovered some ground on Wednesday.