In a major setback for the logistics giant UPS (UPS), the company failed to renew its contract with the U.S. Postal Service (USPS) for final-mile delivery of SurePost. As a result, the U.S. Postal Service (USPS) will no longer deliver UPS SurePost packages following the contract’s expiration earlier this year. This was also confirmed by the International Brotherhood of Teamsters, representing UPS drivers, in a recent Facebook post. The post on the social media platform stated, “Millions of packages moved away from SurePost and the USPS, now sorted and delivered by hardworking UPS Teamsters.”
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How Will the Contract Expiration Impact UPS?
UPS SurePost is a reliable economy service for less urgent packages. This service is ideal for lightweight packages under 10 pounds, can be shipped to 48 U.S. states and has transit times of two to six days.
Following the contract expiration, a UPS spokesperson explained to USA Today that SurePost service will continue to exist but will now be handled entirely within the postal and logistics service company’s network. This transition is expected to result in faster deliveries, reducing transit times from two to seven days to two to six days. However, this change comes with limitations, as the SurePost service will no longer be available for U.S. Territories, including Alaska, Hawaii, Puerto Rico, PO Boxes, or Military APO/FPO addresses, according to a USA Today report citing Supply Chain Dive.
In terms of employee impact, the expiration of this contract is likely to benefit UPS drivers. The rise in package volume offers drivers more delivery opportunities and access to overtime pay. Additionally, the new agreement will ensure that more packages will be delivered by UPS drivers, boosting efficiency and worker involvement.
JP Morgan Analyst Raises Concerns over USPS Contract Expiration
However, top-rated JP Morgan analyst Brian Ossenbeck viewed the failure to renew this contract as “another reason to avoid” UPS stock ahead of its Q4 earnings and 2025 outlook. This sentiment echoes analysts bearish on UPS stock. According to TipRanks “Bulls Say, Bears Say”, the company’s failure to renew the USPS contract could result in “risking a significant portion of domestic and total revenue.”
Ossenbeck remains sidelined on the stock with a Hold rating but raised the price target to $135 from $134, implying an upside potential of 3.9% from current levels.
Is UPS a Good Stock to Buy Now?
Analysts remain cautiously optimistic about UPS stock, with a Moderate Buy consensus rating based on 13 Buys, four Holds, and two Sells. Over the past year, UPS has declined by more than 10%, and the average UPS price target of $147.83 implies an upside potential of 13.8% from current levels.
