UPS Increases Fees on U.S.-Bound Imports: How to Play the Stock Now

United Parcel Service UPS has announced plans to increase international processing fees for imports into the United States, as the De Minimis exemption is set to expire on Aug. 29. The trade exemption had allowed packages containing goods valued at less than $800 to enter the United States without additional taxes. In July, President Trump signed the executive order to eliminate the exemption.Following the expiry of the exemption on Friday, the imports into America will have to go through a more rigorous customs clearance process, with the shipments subject to applicable tariffs (depending on the country of origin).From Sept. 8, UPS will levy a $2.50 international processing fee for packages that are U.S.-bound, across three UPS Worldwide services: Express, Express Plus and Express NA1. UPS also announced that it will levy an entry preparation charge for low-cost Canada-to-U.S. shipments under its UPS Standard service starting Aug. 29. The fee will be $10 for shipments with a duty value of up to $200. The charge will increase to $20 for shipments with a duty value exceeding $200 to $800.With the U.S. administration ending the tax exemption for low-value international packages, UPS’ rival FedEx Corporation FDX has already upped international processing fees for imports into the United States. The move by FedEx and UPS comes as many postal services across the world are hitting the pause button as far as shipments into the United States are concerned, following the executive order to end the duty-free De Minimis provision.With imports into the United States likely to get more complicated going forward, let's delve deeper to find out how investors should approach UPS stock in the current scenario.UPS Suffering From Revenue WeaknessGeopolitical uncertainty and higher inflation continue to hurt consumer sentiment and growth expectations. The weak demand scenario due to the economic slowdown has also led to a decline in the volume of packages shipped at UPS.Due to the weakness, average daily volumes (consolidated) have been weak. At UPS, average daily volumes on a consolidated basis have declined 3.8% year over year in the first half of 2025.  The tariff-induced uncertainty caused UPS not to give any revenue or operating profit guidance for 2025 while releasing second-quarter 2025 results. In the June quarter, revenues decreased 2.7% year over year.UPS Looking to Cut Costs to Thwart Revenue WoesIt is no secret that UPS’ bottom line is being hurt by high costs, mainly on the labor front. High labor costs, in addition to softness concerning parcel volumes, are hurting the company’s operations.  The weak demand scenario is hurting results through sinking volumes. Faced with these headwinds, the company is focusing on cutting costs. As part of this exercise, UPS is offering buyouts to delivery drivers for the first time in its 117-year history. UPS’ full-time drivers are eligible for this offer. The company reportedly aims to trim its workforce by 20,000 this year, representing approximately 4% of the global workforce, and shut 73 facilities to streamline operations and lower labor costs.Apart from the tariff-induced economic uncertainties, UPS’ decision to reduce business with its largest customer, Amazon AMZN, contributed to the decision to trim the workforce. UPS’ management has reached an agreement in principle with Amazon to lower the latter’s volume by more than 50% by June 2026. According to UPS CEO, Amazon was not its most profitable customer.UPS’ Weak Price PerformanceShares of UPS have plunged in excess of 30% year to date compared with the Zacks Transportation—Air Freight and Cargo industry’s 23.8% fall. FedEx's price performance is better than that of UPS.YTD Price ComparisonImage Source: Zacks Investment ResearchUnfavorable Earnings Estimate MovementThe Zacks Consensus Estimate for UPS’ 2025 adjusted earnings is currently pegged at $6.53 per share, indicating a 15.4% year-over-year decline. The consensus mark for 2025 revenues suggests a 3.9% decline from 2024 actuals. The Zacks Consensus Estimate for 2025 and 2026 earnings has been revised downward over the past 60 days.Image Source: Zacks Investment ResearchUPS’ Valuation: A Saving GraceUPS is currently considered relatively undervalued, trading at a forward 12-month price to earnings (P/E) of 12.32X. This figure is lower than its industry average. UPS currently has a  Value Score of B. Image Source: Zacks Investment ResearchDon’t Buy UPS Stock NowAgreed that UPS’ valuation is attractive. Moreover, UPS’ expansion efforts look good. However, the headwinds mentioned in the write-up are hard to ignore. Moreover, the sustainability of UPS’ dividends (annually: $6.56 per share) is questionable. UPS’ elevated dividend payout ratio (the percentage of net income paid out as dividends) of 87% highlights the concern associated with its ability to maintain dividend payouts over the long term.UPS' elevated dividend payout is hurting its operational flexibility, with free cash flow not even covering the dividend paid in the first half of 2025. The company only generated $742 million in free cash flow in the first half but paid $2.7 billion in dividends.With volume weakness already hurting UPS, the elimination of the De Minimis exemption is likely to result in further pain, at least in the near term. UPS currently carries a Zacks Rank #4 (Sell) and looks like a stock to avoid rather than chase.You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.   Beyond Nvidia: AI's Second Wave Is HereThe AI revolution has already minted millionaires. But the stocks everyone knows about aren't likely to keep delivering the biggest profits. Little-known AI firms tackling the world's biggest problems may be more lucrative in the coming months and years.See "2nd Wave" AI stocks now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Amazon.com, Inc. (AMZN): Free Stock Analysis Report United Parcel Service, Inc. (UPS): Free Stock Analysis Report FedEx Corporation (FDX): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks