AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-2: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 6/6 · 18/10/2026
Moat44
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
structural advantage · 2/4 · Reported multi-year delivery leadership and 96.8% committed-service performance support service differentiation. A substantial physical network supports delivery capability, but comparative costs and barriers to replication are not established.
durability · 2/4 · The reported eight-year service record supports persistence. Actual customer diversion and contractual exit rights constrain the durability of its commercial benefits.
customer dependency · 1/4 · Actual diversions, including those attributed to labor negotiations, and significant-customer termination rights demonstrate limited dependency. Integration claims do not establish binding switching friction.
erosion resilience · 2/4 · Realized labor-hour reductions and program benefits demonstrate adaptation. Those achievements coexist with substantial restructuring costs and falling international volume and operating profit, leaving resilience mixed.
Pricing power38
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
realized pricing · 2/4 · International rates/product mix contributed positively in both the second quarter and first half of 2026, alongside applied fuel surcharges. These are observed monetization outcomes, but mix is inseparable from price, and 2025 export yield weakened as customers selected economy products.
retention · 1/4 · Assessed indirectly from operating demand rather than a retention rate. Actual customer diversions and declining international volume indicate fragile retention, although deliberate revenue-quality actions explain part of the decline and healthcare customer demand increased.
margin resilience · 1/4 · In first-half 2026 International Package, revenue rose 8.2% but expenses rose 11.5%, operating profit fell 10.9%, and operating margin declined from 14.8% to 12.2%. Pricing and surcharges did not preserve profitability in this disclosed segment; consolidated resilience cannot be inferred.
contractual freedom · 2/4 · UPS has raised prices, applies fuel surcharges and regularly adjusts brokerage rates. Significant-customer termination rights and actual ability to divert business limit effective freedom. Detailed customer repricing clauses are absent.
Predictability88
Five consecutive annual periods. Equal weights: nondeclining revenue frequency; revenue-growth volatility (5–40pp); positive FCF frequency; FCF-margin volatility (3–20pp). Stability indicator, not a growth forecast.
- Nondeclining revenue years (%)
- 50.00
- Revenue growth volatility (pp)
- 4.61
- Positive FCF years (%)
- 100.00
- FCF margin volatility (pp)
- 2.23
Financial strength49
Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, or reported pretax profit plus reported interest expense when operating income is unavailable. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope.
- debtFcfGrade
- 41.95
- netDebtEbitGrade
- 53.63
- interestCoverageGrade
- 61.23
- currentRatioGrade
- 37.54
- Debt / FCF (x)
- 5.06
- Net debt / operating income (x)
- 2.32
- Interest coverage (x)
- 7.74
- Current ratio (x)
- 1.22
Capital allocation97
Three-year equal-weight indicators: pretax return on average invested capital (0–25%; equity + debt − cash, each year and its prior year), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income or, if unavailable, EBIT calculated from reported pretax profit plus reported interest expense; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. Nonpositive invested capital has no defined return and remains unavailable. Does not establish acquisition quality or buyback timing.
- 3-year pre-tax operating return (%)
- 24.56
- 3-year average dilution (%)
- -0.85
- 3-year average SBC / revenue (%)
- 0.12
- cashConversionGrade
- 88.90
Management56
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 2/4 · Operating cash generation and lower capital spending demonstrate funding capacity and adjustment to demand. However, 2025 operating cash less capital expenditure was below dividends and repurchases, before acquisitions, while net long-term borrowing increased. First-half 2026 cash capital expenditure fell and repurchases stopped, but finance leases explain part of the spending reduction. Long-term investment returns remain unproven.
incentive alignment · 3/4 · Existing multi-year awards, clawbacks and actual below-target payouts support meaningful alignment. The later approved 2026 RPUs use revenue growth and adjusted ROIC, a three-year period and a relative shareholder-return modifier. This establishes award design and payout discipline, not future vesting or exceptional results; ownership percentages are unavailable.
execution · 2/4 · Direct operating evidence includes service above target, reduced labor hours and achieved program benefits. Revenue and adjusted operating profit missed 2025 incentive targets, while international profit weakened in 2026 and restructuring costs remained substantial. Execution is mixed despite demonstrated operational achievements.
governance · 2/4 · Independent audit and risk oversight and existing clawback practices support governance. Unequal share-class voting rights and a competition infringement affirmed by the Spanish Supreme Court are counterweights. The climate-governance criticism is a shareholder proponent's allegation rather than an independently established finding.
Evidence
For our customers, in 2025, we reported the best on-time delivery of any carrier for the eighth year in a row.
Proxy opening letter: reported eight-year on-time delivery leadership · Filed 19/03/2026
44 Notice of Annual Meeting of Shareowners and 2026 Proxy Statement Actual performance results and MIP award payouts were as follows: 2025 MIP Performance Metric 2025 MIP Performance Target Actual Performance Weighted Payout Score (% of Target) Consolidated Revenue $89.0B $88.7B 38.3% Consolidated non-GAAP Adjusted Operating Profit $9.6B $8.7B(1) 24.8% Enterprise Total Committed Service 96.5% 96.8% 11.5% 2025 MIP Payout Factor 75% (1) Determined by reference to our publicly reported non-GAAP adjusted operating profit, further adjusted to remove (a) gains related to sale-leaseback transactions, (b) certain charges related to the grounding of our MD-11 fleet and (c) certain international tariff impacts.
Executive compensation: 2025 actual operating performance and MIP payouts · Filed 19/03/2026
Brand Equity. Our leading and trusted brand stands for service quality, reliability and innovation.
Business: issuer assertion about brand equity · Filed 17/02/2026
Customers could choose, and have in the past chosen, to divert all or a portion of their business with us to one of our competitors, demand pricing concessions, request enhanced services that increase our costs, or develop their own logistics capabilities.
Risk factors: actual customer diversion and possible customer demands · Filed 17/02/2026
In addition, certain of our significant customer contracts include termination rights of either party upon the occurrence of certain events or without cause upon advance notice to the other party.
Risk factors: significant customer contract termination rights · Filed 17/02/2026
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS International Package Three Months Ended June 30, Change Six Months Ended June 30, Change 2026 2025 $ % 2026 2025 $ % Average Daily Package Volume (in thousands): Domestic 1,394 1,507 (7.5) % 1,432 1,541 (7.1) % Export 1,610 1,681 (4.2) % 1,641 1,725 (4.9) % Total Average Daily Package Volume 3,004 3,188 (5.8) % 3,073 3,266 (5.9) % Average Revenue Per Piece: Domestic $ 9.74 $ 8.61 $ 1.13 13.1 % $ 9.44 $ 8.25 $ 1.19 14.4 % Export 38.45 32.38 6.07 18.7 % 36.32 31.87 4.45 14.0 % Total Average Revenue Per Piece $ 25.13 $ 21.14 $ 3.99 18.9 % $ 23.80 $ 20.73 $ 3.07 14.8 % Operating Days in Period 64 64 126 126 Revenue (in millions): Domestic $ 869 $ 830 $ 39 4.7 % $ 1,704 $ 1,601 $ 103 6.4 % Export 3,962 3,484 478 13.7 % 7,510 6,928 582 8.4 % Cargo and Other 213 171 42 24.6 % 370 329 41 12.5 % Total Revenue $ 5,044 $ 4,485 $ 559 12.5 % $ 9,584 $ 8,858 $ 726 8.2 % Operating Expenses (in millions): Operating Expenses $ 4,421 $ 3,813 $ 608 15.9 % $ 8,414 $ 7,545 $ 869 11.5 % Non-GAAP Adjustments to Operating Expenses Transformation Strategy Costs — (10) 10 (100.0) % (4) (23) 19 (82.6) % Non-GAAP Adjusted Operating Expenses $ 4,421 $ 3,803 $ 618 16.3 % $ 8,410 $ 7,522 $ 888 11.8 % Operating Profit (in millions) and Operating Margin: Operating Profit $ 623 $ 672 $ (49) (7.3) % $ 1,170 $ 1,313 $ (143) (10.9) % Non-GAAP Adjusted Operating Profit $ 623 $ 682 $ (59) (8.7) % $ 1,174 $ 1,336 $ (162) (12.1) % Operating Margin 12.4 % 15.0 % 12.2 % 14.8 % Non-GAAP Adjusted Operating Margin 12.4 % 15.2 % 12.2 % 15.1 % Currency Benefit / (Cost) – (in millions)(1): Revenue $ 40 $ 196 Operating Expenses (37) (205) Operating Profit $ 3 $ (9) (1) Net of currency hedging; amount represents the change in currency translation compared to the prior year.
MD&A International Package: first-half 2026 volume, revenue per piece, expenses and operating profit · Filed 05/08/2026
Competitors include the U.S. and international postal services, various motor carriers, express companies, freight forwarders, air couriers, large transportation companies, e-commerce companies and other retailers that continue to make significant investments in their own technology and logistics capabilities, some of whom are currently our customers.
Competition risk: postal services, transportation providers and customer logistics investment · Filed 17/02/2026
Competitors have cost, operational and organizational structures that differ from ours and may offer services or pricing terms that we are not willing to offer.
Competition risk: differing competitor cost structures and pricing terms · Filed 17/02/2026
https://www.pik-potsdam.de/en/news/latest-news/38-trillion-dollars-in-damages-each-year-world-economy-alreadycommitted-to-income-reduction-of-19-due-to-climate-change, as revised by https://www.pik-potsdam.de/en/news/latestnews/nature-study-on-economic-damages-from-climate-change-revised (5)https://www.unepfi.org/wordpress/wp-content/uploads/2024/05/Climate-Risks-in-the-Transportation-Sector-1.pdf (6)https://about.ups.com/content/dam/upsstories/images/our-impact/reporting/2024-UPS-GRI-Report.pdf, p.27, 29 (7)https://www.sec.gov/ix?doc=/Archives/edgar/data/1090727/000109072725000019/ups-20241231.htm, p.49 91 UPS Lags Competitors Peers such as DHL and FedEx demonstrate stronger governance and execution of climate strategy.8 Both have committed to value chain emission reduction targets through the Science Based Targets initiative, conduct scenario analyses, apply a double materiality approach, and link executive pay to sustainability outcomes.
Shareholder climate proposal supporting statement: named peers and proponent's governance comparison · Filed 19/03/2026
PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment as of June 30, 2026 and December 31, 2025 consisted of the following (in millions): 2026 2025 Vehicles $ 11,735 $ 11,787 Aircraft(1) 24,605 24,149 Land 2,027 2,046 Buildings 6,969 6,906 Building and leasehold improvements 5,711 5,686 Plant equipment 20,403 19,817 Technology equipment 2,694 2,635 Construction-in-progress 2,320 2,136 76,464 75,162 Less: Accumulated depreciation and amortization(1) (38,570) (37,431) Property, Plant and Equipment, Net $ 37,894 $ 37,731 (1) Includes MD-11 airframes and engines that were fully depreciated as of December 31, 2025.
Note 5: property, plant and equipment · Filed 05/08/2026
The decreases were primarily related to the impact of lower headcount and a reduction of approximately 27 million labor hours resulting from the strategic execution of our Network Reconfiguration and Efficiency Reimagined initiatives.
MD&A operating expenses: realized reduction in labor hours · Filed 17/02/2026
In the first six months of 2026, we achieved approximately $1.2 billion of program benefits from these initiatives.
MD&A transformation initiatives: achieved first-half 2026 program benefits · Filed 05/08/2026
As of June 30, 2026, we had incurred costs to date of $1.8 billion, including $1.2 billion in 2026.
Note 16: cumulative and 2026 network reconfiguration costs · Filed 05/08/2026
Various circumstances precipitated these initiatives, including identification and prioritization of certain investments, developments and changes in competitive landscapes, inflationary pressures, consumer behaviors and other factors including post-COVID normalization and volume diversions attributed to our 2023 labor negotiations.
Transformation strategy: actual volume diversions attributed to 2023 labor negotiations · Filed 05/08/2026
2025 (5.8) % 7.9 % 9.6 % 0.8 % 12.5 % Year to date 2026 vs.
International Package revenue bridge: second-quarter 2026 volume, rates/product mix, fuel and currency · Filed 05/08/2026
2025 (5.9) % 6.8 % 5.1 % 2.2 % 8.2 % 37 Table of Contents UNITED PARCEL SERVICE, INC.
International Package revenue bridge: first-half 2026 volume, rates/product mix, fuel and currency · Filed 05/08/2026
Domestic average daily volume decreased 7.5% for the quarter (down 7.1% year to date) primarily driven by domestic standard product declines in EMEA and our revenue quality efforts.
International Package volume: domestic declines and revenue quality efforts · Filed 05/08/2026
Export revenue per piece declined 0.6% in 2025, primarily as a result of reduced demand-related surcharges in Asia, changes in geographic distribution and an unfavorable shift in product mix in EMEA, as customers increasingly selected economy products.
International Package: 2025 export revenue-per-piece decline and economy-product selection · Filed 17/02/2026
Types of Hedges Commodity Risk Management The fuel surcharges that we apply in our domestic and international package businesses are the primary means we employ to reduce the risk of adverse fuel price changes on our business.
Commodity risk management: applied fuel surcharges · Filed 17/02/2026
In order to mitigate the impact of fuel surcharges imposed on us by outside carriers, we regularly adjust the rates we charge for our freight brokerage services.
Commodity risk management: regular freight brokerage rate adjustments · Filed 17/02/2026
Additionally, from time to time we have raised, and may in the future raise, prices and our customers may not be willing to accept these higher prices.
Competition risk: past price increases and possible customer resistance · Filed 17/02/2026
AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS (In millions) 2025 2024 2023 Cash Flows From Operating Activities: Net income $ 5,572 $ 5,782 $ 6,708 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization 3,746 3,609 3,366 Pension and postretirement benefit (income) expense 1,009 1,698 1,330 Pension and postretirement benefit contributions (1,361) (1,524) (1,393) Self-insurance reserves 236 44 57 Deferred tax (benefit) expense (8) (15) 199 Stock compensation expense 73 24 220 Other (gains) losses 113 262 265 Changes in assets and liabilities, net of effects of business acquisitions: Accounts receivable (382) (566) 1,256 Other assets 65 70 87 Accounts payable (190) 262 (1,377) Accrued wages and withholdings 27 501 (296) Other liabilities (517) (11) (42) Other operating activities 67 (14) (142) Net cash from operating activities 8,450 10,122 10,238 Cash Flows From Investing Activities: Capital expenditures (3,685) (3,909) (5,158) Proceeds from disposal of businesses, property, plant and equipment 700 1,115 193 Purchases of marketable securities (90) (76) (3,521) Sales and maturities of marketable securities 293 2,748 2,701 Acquisitions, net of cash acquired (1,968) (71) (1,329) Other investing activities 15 (24) (19) Net cash used in investing activities (4,735) (217) (7,133) Cash Flows From Financing Activities: Net change in short-term debt — (1,272) 1,272 Proceeds from long-term borrowings 4,153 2,785 3,429 Repayments of long-term borrowings (2,069) (2,487) (2,429) Purchases of common stock (1,000) (500) (2,250) Issuances of common stock 159 232 248 Dividends (5,398) (5,399) (5,372) Other financing activities 14 (209) (432) Net cash used in financing activities (4,141) (6,850) (5,534) Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash 201 (149) 33 Net Increase (Decrease) In Cash, Cash Equivalents and Restricted Cash (225) 2,906 (2,396) Cash, Cash Equivalents and Restricted Cash: Beginning of period 6,112 3,206 5,602 End of period $ 5,887 $ 6,112 $ 3,206 See notes to audited, consolidated financial statements.
Audited consolidated cash flows: 2023–2025 operating cash, investment and financing · Filed 17/02/2026
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cash Flows From Investing Activities Our primary (uses) sources of cash from investing activities were as follows (in millions): Six Months Ended June 30, 2026 2025 Net cash used in investing activities $ (1,510) $ (2,278) Capital Expenditures: Buildings, facilities and plant equipment $ (1,246) $ (1,147) Information technology (428) (539) Aircraft and parts (37) (120) Vehicles (13) (193) Total capital expenditures $ (1,724) $ (1,999) Capital expenditures as a % of revenue 3.9 % 4.7 % Other Investing Activities: Proceeds from disposal of businesses, property, plant and equipment $ 198 $ 91 Acquisitions, net of cash acquired $ — $ (479) Other investing activities $ 16 $ 109 For the six months ended June 30, 2026, total capital expenditures decreased, primarily driven by reduced spending on vehicles due to lower package volume and a focus on routine replacements for vehicles at the end of their useful lives, decreased aircraft expenditures due to aircraft deliveries under finance lease arrangements and lower technology infrastructure spending as a result of project completion and non-recurring prior year investments.
MD&A investing cash flows: first-half 2026 capital expenditure and finance-lease effects · Filed 05/08/2026
We did not repurchase any shares under this authorization in 2026.
Equity securities: no repurchases under the authorization in 2026 · Filed 05/08/2026
Compensation practices that support these principles include: •A balanced mix of cash and equity, providing retention benefits and appropriate incentives over multiple vesting periods; •Performance based equity awards vesting over multiple years, furthering both retention and incentive goals; •Periodic reviews of incentive compensation metrics to facilitate alignment with strategic initiatives; •Multiple distinct goals for annual and long-term performance based awards, avoiding overemphasis on any one metric and mitigating excessive risk-taking; •Payout structures for the annual Management Incentive Program (the “MIP”) that provide visibility and clarity to participants, and limit payout discretion; •Long-term Incentive Performance (the “LTIP”) awards that vest over a three-year period; •Stock option awards that vest over a five-year period and only provide value if our stock price increases; •Clawback policy that applies to all executive officers; •Awards that require a double trigger — both a change in control and a termination of employment or a failure to continue, assume or substitute the award — to accelerate vesting; and •No tax gross-ups on equity awards or golden parachute excise taxes.
Executive compensation: existing vesting, clawback and change-in-control practices · Filed 19/03/2026
2025 Compensation Actions Key 2025 compensation decisions affecting our executive officers included: •Most target direct compensation was performance-based or considered “at risk” - 94% for the CEO and 86% for all other named executive officers (“NEOs”) as a group, page 41; •Base salary increases as a result of the annual salary review process, page 43; •Annual MIP awards were earned and paid below target, page 44; •Receipt of a Restricted Stock Unit grant, for executives other than the CEO, to assist in retaining and motivating leadership at a critical transition stage, page 48; and •2023 LTIP awards, which had three-year performance goals ending in 2025, were earned and paid below target, page 47.
Executive compensation: actual 2025 compensation actions and below-target payouts · Filed 19/03/2026
Long-Term Incentive Program ("LTIP") On May 6, 2026, the Compensation and Human Capital Committee of the Board (the "Compensation Committee") approved awards under the Company's 2026 LTIP award.
Note 4: May 2026 approval of LTIP awards · Filed 05/08/2026
RPU performance targets are equally weighted between adjusted revenue growth and non-GAAP adjusted return on invested capital ("ROIC").
Note 4: approved RPU revenue-growth and adjusted-ROIC performance targets · Filed 05/08/2026
The RPUs vest at the end of a three-year performance period, assuming continued employment with the Company (except in the case of death, disability or retirement, in which case immediate vesting occurs on a prorated basis).
Note 4: three-year RPU performance period and vesting exceptions · Filed 05/08/2026
The final number of RPUs earned is based on Company performance and subject to modification based on the Company's total shareholder return relative to the Standard & Poor's 500 Index.
Note 4: relative shareholder-return modification of earned RPUs · Filed 05/08/2026
Each member of the Audit Committee meets the independence requirements of the NYSE and SEC rules applicable to audit committee members, and each is financially literate.
Board committees: actual Audit Committee independence and financial literacy · Filed 19/03/2026
The Board has appointed a Risk Committee, consisting entirely of independent directors, whose responsibilities include assisting the Board in overseeing management’s identification and evaluation of strategic enterprise risks, including risks associated with privacy, technology, information security, AI, cybersecurity and cyber incident response and business continuity.
Cybersecurity governance: independent Risk Committee and oversight responsibilities · Filed 17/02/2026
Class A shares are entitled to ten votes per share and class B shares are entitled to one vote per share on each matter acted upon at the Annual Meeting.
Security ownership: unequal voting rights of class A and class B shares · Filed 19/03/2026
In March 2018, the CNMC adopted a final decision, finding an infringement and imposing an immaterial fine on UPS.
Legal proceedings: competition infringement decision and immaterial fine · Filed 05/08/2026
In June 2026, the Spanish Supreme Court affirmed the decision.
Legal proceedings: June 2026 Spanish Supreme Court affirmation · Filed 05/08/2026
This was primarily due to an increase of $232 million for the quarter (up $420 million year to date) from our healthcare logistics business as a result of our fourth quarter 2025 acquisition of AHG, as well as higher volume driven by additional healthcare logistics customer demand.
SCS revenue: healthcare acquisition contribution and additional customer demand · Filed 05/08/2026
