Company DCF analysis file
UPS DCF Analysis
UPS’s DCF needs a delivery-density and network-cost case, not merely a higher revenue-per-piece assumption. Compensation, transport, pension funding and equipment obligations can move at different speeds as volume and customer mix change. The annual bridges below connect those costs to cash and retain the actual segment and business perimeter.
Read network revenue with the full employee and transport cost base
Years ended December 31, 2024 and 2025; consolidated company. Amounts use the monetary scale stated in each table caption. Source: annual financial statements. Reported lines retain the issuer’s scope; derived ratios use the displayed denominators.
| Measure | FY2024 | FY2025 |
|---|---|---|
| Revenue | 91,070 | 88,661 |
| Compensation / benefits | 48,093 | 48,605 |
| Repairs / maintenance | 2,940 | 3,107 |
| Depreciation / amortization | 3,609 | 3,746 |
| Purchased transportation | 13,589 | 10,588 |
| Fuel | 4,366 | 4,316 |
| Other occupancy | 2,117 | 2,269 |
| Other expenses | 7,888 | 8,163 |
| Total operating expenses | 82,602 | 80,794 |
| Operating profit | 8,468 | 7,867 |
| Net income | 5,782 | 5,572 |
| Operating margin: derived | 9.3% | 8.9% |
Labor and network costs do not automatically fall in proportion to lost pieces. A higher-yield customer case should explain the contribution retained after handling, linehaul and delivery costs, including any transition in fixed-cost absorption. The lower purchased-transportation line also needs a consistent business and sourcing perimeter before it is interpreted as recurring efficiency.
A pension earnings charge and a pension contribution are different events. Model the operating workforce needed by the service plan, then reconcile benefit expense and funding. Removing a reported charge does not cancel an existing cash obligation or establish a lower sustainable delivery cost.
Preserve the reported package-segment and other-business boundary
The annual segment note identifies two reportable package segments. Other revenue and profit below are operating segments below the quantitative reporting thresholds; they are not a third reportable package segment.
| Population | Revenue | Operating profit |
|---|---|---|
| U.S. Domestic Package | 59,519 | 3,926 |
| International Package | 18,576 | 2,873 |
| Other operating businesses | 10,566 | 1,068 |
| Consolidated | 88,661 | 7,867 |
The filing evaluates many capital decisions at the integrated network level and does not disclose segment property investment. Do not invent segment free cash flow by assigning group capex in proportion to revenue. Business disposals and healthcare acquisitions also change what the other-business comparison contains.
Trace earnings into cash and reinvestment
Reconciliation source: annual earnings and cash-flow statements. Subtotals below are checkpoints, not extra amounts to add. Grouped adjustments are calculated from the disclosed cash-flow lines.
| Step | FY2025 |
|---|---|
| Operating profit | 7,867 |
| Investment / other income | 314 |
| Interest expense | -1,017 |
| Income tax | -1,592 |
| Net income: subtotal | 5,572 |
| Depreciation / amortization | 3,746 |
| Pension / postretirement expense | 1,009 |
| Pension / postretirement contributions | -1,361 |
| Other reconciliation / operating items | 481 |
| Operating asset / liability changes | -997 |
| Operating cash: subtotal | 8,450 |
| Capital expenditures | -3,685 |
| CFO less capex: derived subtotal | 4,765 |
| Finance-lease principal repayments | -133 |
| After these cash deductions: derived | 4,632 |
Other reconciliation combines self-insurance reserves, deferred tax, stock compensation, gains or losses and other operating activities. The operating-balance group combines receivables, other assets, payables, wage accruals and other liabilities. Benefit expense is added back while the actual contribution is deducted; neither can be omitted simply to improve a cash margin.
The lease-principal deduction is a separately identified financing flow. Its inclusion here creates a defined cash checkpoint, not issuer unlevered free cash flow. New leased equipment can change the mix of future property payments and financing obligations, so lower cash capex alone does not establish lower economic investment.
Stress network compensation before assuming improved operating leverage
Illustration: increase compensation and benefits by 1%, with revenue and all other operating costs fixed. This isolates cost pressure; it is not a forecast of a labor contract, staffing change or the cash timing of employee benefits.
| Measure | Historical basis | Illustrative case |
|---|---|---|
| Compensation / benefits | 48,605 | 49,091.05 |
| Operating profit | 7,867 | 7,380.95 |
The exact pre-tax operating reduction is $486.05 million. Apply the related tax and payment schedules before estimating cash, and identify any density or productivity benefit independently rather than assuming that a higher revenue per piece absorbs the entire cost change.
Keep interim reporting separate from the annual basis
Q2 2026 covers 2026-04-01 through 2026-06-30 and was released 2026-07-28. Revenue was $22,834 million in this quarter. Source: official Q2 2026 results.
The later quarter’s Ground Saver sourcing changes can move purchased transport and staffing costs, while finance leases can reduce current aircraft cash spending without removing financing obligations. Keep that operating-model and funding change separate from the completed annual comparison and roll the network case forward on a consistent business perimeter.
Turn the financial basis into a DCF case
| Decision | Treatment |
|---|---|
| Revenue | Model pieces, mix and retained contribution with the applicable business perimeter. |
| Network costs | Connect compensation, linehaul and delivery capacity to density and transition timing. |
| Benefits | Reconcile pension expense, funding and remaining claims consistently. |
| Investment | Distinguish physical cash purchases, leased equipment and finance-lease repayments. |
| Valuation | Match operating tax and lease conventions, then reconcile dated financing claims, cash and diluted shares. |
An enterprise forecast should fund the network and working balances supporting its assumed service and customer mix. Starting from reported CFO requires tax, interest and benefit-funding reconciliation; starting from operating profit requires explicit cash and reinvestment schedules. A terminal cost ratio must sustain the required delivery density and service quality without relying on repeated asset sales.
The UPS company analysis explains the wider operating context. Use the company forecast tool and DCF calculator with explicit assumptions. Use the historical financials to define an explicit operating and reinvestment case, then supply valuation-date capital costs, claims and diluted shares. Check that each cash claim is counted once before deriving a per-share value.
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