Note · Corporate Finance
Why I split healthcare out of UPS’s supply chain segment
A segment that contains a divestiture and a string of acquisitions has no usable growth rate. How separating healthcare logistics changed the UPS forecast.
Hizbawi MeresaSeptember 30, 2026 2 min read
What happened
UPS reported about $10.6 billion of Supply Chain Solutions and other revenue in 2025. But that history isn’t stable: Coyote contributed $1.6 billion of revenue in 2024 before it was divested, while healthcare logistics inside the segment grew by $303 million in 2025 through the Frigo-Trans and Andlauer Healthcare Group acquisitions plus organic growth. Company-wide, healthcare revenue passed $11 billion in 2025 and topped $3 billion in a single quarter for the first time in Q1 2026.
Why it matters
A single growth rate for this segment would average a shrinking legacy business with the fastest-growing, highest-yield part of UPS. It would understate one and overstate the other — and hide the part of the portfolio the strategy is actually leaning into.
My read
In the model I split the segment into two lines: healthcare logistics, growing about 12% in the base case (8% downside, 15% upside), and core supply chain excluding Coyote at about 4% (1% to 6%). The general rule I took from it: when a segment’s history includes a divestiture and acquisitions, its CAGR is a mixture, not a trend. Normalize first, then forecast.
Sources: UPS 2025 Form 10-K; UPS Q1 2026 earnings call; my UPS assumption book (June 2026).
The work behind this essay
UPS: Strategic DCF Valuation of a Live Transformation
An independent, outside-in strategic and DCF valuation of UPS's 2026 transformation — reframing the company from a parcel indexer into a portfolio of revenue-quality decisions, built on a 26-tab driver model and four probability-weighted scenarios.
Read the case study