United Parcel (UPS – Research Report), the Industrials sector company, was revisited by a Wall Street analyst today. Analyst Ravi Shanker from Morgan Stanley remains neutral on the stock and has a $95.00 price target.
Ravi Shanker’s Sell rating on United Parcel Service (UPS) is based on a detailed assessment of the company’s recent performance and future outlook. The management has characterized 2023 as a challenging year, impacted by broader economic conditions and the implications of a new labor contract. Shanker does not view the situation as a temporary low point but as a new, established baseline for the company’s earnings, which aligns with the pre-pandemic mid-$7 EPS figures. The labor contract, in particular, is seen as a significant cost factor that is expected to persist rather than being a one-off event.
Further analysis suggests that UPS is not only facing increased labor costs but also a decrease in domestic volume, which does not correlate with the overall growth seen in the eCommerce sector. This indicates potential market share losses for UPS. Moreover, the company’s revenue growth expectations for the second half of 2024 seem optimistic, given the adverse trends in package mix, expiring surcharges, and increased competition from USPS, Amazon Logistics, and regional carriers. Additionally, Shanker points out the risks associated with UPS’s reliance on Amazon, which could further impact the company’s operational leverage if Amazon shifts more volume to in-house delivery. Despite cost-cutting measures, including significant job reductions, these savings are already factored into the guidance, and further optimizations are expected to be marginal rather than transformational, keeping the focus on the ongoing top-line challenges.
According to TipRanks, Shanker is an analyst with an average return of -2.1% and a 50.00% success rate. Shanker covers the Industrials sector, focusing on stocks such as Delta Air Lines, Boeing, and CH Robinson.
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United Parcel (UPS) Company Description:
Founded in 1907, Georgia-based United Parcel Service, Inc. is the world’s largest package delivery company and a leading provider of global supply chain management solutions. The company also operates one of the largest airlines in the world and has the world’s largest fleet of alternative-powered vehicles. The company operates through three segments: U.S. Domestic Package, International Package, and Supply Chain and Freight.
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