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On Wednesday, Bernstein analysts, led by David Vernon, adjusted the price target for UPS (NYSE:UPS) shares, reducing it significantly to $132 from the previous $179, while maintaining an Outperform rating. The revision comes ahead of the company’s first-quarter earnings report for 2025, scheduled for April 29. Currently trading at $96.84, near its 52-week low of $90.55, InvestingPro analysis suggests UPS is undervalued, with 14 analysts recently revising their earnings expectations downward.
In the wake of recent commercial shifts, including UPS’s decision to cut ties with Amazon (NASDAQ:AMZN) and insource SurePost, as well as potential new challenges in the international segment, Bernstein has revised its projections. Vernon notes that these changes, along with the ongoing trade war, have necessitated a reevaluation of UPS’s financial outlook. Despite these headwinds, the firm believes domestic profit growth for UPS remains achievable in 2025 through strategic price increases and asset rationalization. The logistics giant, with its substantial $91.07 billion in revenue and $82.07 billion market capitalization, maintains a moderate debt level and trades at a P/E ratio of 14.31x.
The impact of tariff changes and de minimis rules on UPS’s international operations was also addressed. While acknowledging the prevailing fear and uncertainty, Vernon suggests that the overall exposure to these factors is not particularly large. However, some margin pressure is expected, leading to a more conservative forecast for this segment of the business.
Regarding the sustainability of UPS’s dividend, Vernon’s analysis suggests that the company’s free cash flow and cash reserves are sufficient to cover approximately two years of payouts at current levels. The company has maintained dividend payments for 27 consecutive years, currently offering an attractive 6.77% yield. Starting from a low margin base in 2024, he believes that the dividend is likely to remain stable, supported by the company’s focus on pricing discipline, freight rationalization, and a strong balance sheet characterized by low leverage and pension liabilities. For deeper insights into UPS’s financial health and valuation metrics, InvestingPro subscribers can access the comprehensive Pro Research Report, part of the platform’s coverage of 1,400+ US equities.
Investors and stakeholders of UPS are now looking forward to the first-quarter earnings report to gauge the company’s performance amidst these adjustments and to better understand the potential impacts on its financial health moving forward.
In other recent news, UPS has been the subject of multiple analyst revisions and strategic updates. Evercore ISI has lowered its price target for UPS from $126 to $112 while maintaining an In Line rating, citing a slowdown in U.S. Domestic and International Revenue that could impact earnings per share for the first quarter of 2025. Similarly, Wells Fargo (NYSE:WFC) downgraded UPS from Overweight to Equal Weight and reduced its price target to $98, expressing concerns over UPS’s strategic execution amid a challenging market and potential impacts from changes to the de minimis rule affecting domestic shipping volumes. On the operational front, UPS has expanded its shipping services with the introduction of UPS Ground Saver® and UPS® Ground with Freight Pricing, aiming to enhance cost efficiency and service flexibility for both residential and commercial shippers. These new options are part of UPS’s ongoing strategy to improve customer experience and operational excellence. Additionally, UPS has launched UPS Global Checkout, a service designed to provide transparency for international customs fees and duties, aiming to simplify the global shopping experience for consumers. This initiative is part of UPS’s broader strategy to bolster its international shipping capabilities. Furthermore, Dexterity Inc., an AI robotics firm that counts UPS among its customers, has achieved a $1.65 billion valuation following a $95 million investment round, highlighting the increasing interest in AI-powered solutions in logistics.
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