Shares of United Parcel Services (UPS) have taken a hit in recent sessions as the Iran conflict has pushed oil prices to nearly $120 a barrel, directly affecting the shipping company’s significant fuel costs for ground and air operations. Following this decline, UPS’s Relative Strength Index (14-day) is hovering in the high 20s, indicating oversold conditions that often prompt near-term buying.
At the time of writing, UPS stock is down nearly 18% from its year-to-date high in mid-February.
Long-term investors should consider buying the dip in UPS shares as their fundamental thesis remains intact despite near-term margin pressures.
The company has implemented a deliberate strategic decision to reduce Amazon ( AMZN ) volume by about 50% over an 18-month period, which has already resulted in $3.5 billion in cost savings and the closure of 93 facilities.
This restructuring shows management discipline and execution ability, leading to Q4 results that beat consensus expectations by 2% on revenue and a whopping 8% on earnings.
A lucrative 6.56% dividend yield makes United Parcel Service very attractive to own in 2026.
An oil price shock represents a material but temporary headwind rather than a structural threat to the investment thesis.
While every $10 increase in crude oil adds material costs to UPS’s operating structure, the company has fuel surcharge mechanisms that help pass on higher costs to customers.
Additionally, at nearly 14x forward earnings, UPS shares remain significantly cheaper than peer FedEx ( FDX ) as well as their own historical multiple.
It’s also worth noting that Atlanta-headquartered United Parcel Service missed its 200-day moving average (MA) this week, suggesting the bulls haven’t thrown in the towel just yet.
Wall Street analysts also recommend buying UPS stock at current prices, especially for the company’s healthcare logistics division, which is expected to double revenue to about $20 billion by the end of fiscal 2026.
The consensus rating on United Parcel Services currently stands at “Moderate Buy”, with an average price target of around $115 suggesting a potential upside of around 15% from here.
