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On Thursday, HSBC analysts downgraded United Parcel Service (NYSE:UPS) stock from Buy to Hold, significantly reducing the price target to $105 from the previous $140. The decision followed a reassessment of the company’s expected earnings before interest and taxes (EBIT) and recurring profits, with projections for 2025 to 2027 being lowered by 15-16% and 19-20%, respectively. These adjustments were attributed to anticipated declines in volumes, pricing, and margins. The downgrade comes as UPS shares have declined 23% year-to-date, with the stock currently trading near its 52-week low of $90.55, according to InvestingPro data.
The revised forecast for the second quarter of 2025 anticipates an adjusted operating profit of $1.8 billion, which falls short of UPS’s own guidance. HSBC’s expectations for the company’s 2025 adjusted operating profit are now 7% below the Bloomberg consensus estimates, with a 3-6% reduction for the following two years. InvestingPro data shows that 22 analysts have recently revised their earnings downward for the upcoming period, while the company maintains a significant dividend yield of 6.88%.
HSBC also adjusted the target multiple for UPS to 15.0 times the projected 2025 price-to-earnings (P/E) ratio, a decrease from the previous 16.0 times. This change is based on a standard deviation that is 1.0 below the historical consensus 12-month forward P/E since 1999, adjusted from 0.75 below the mean. The rationale behind this adjustment stems from ongoing tariff uncertainties, which are expected to continue affecting UPS’s short-term demand outlook and share price.
The new price target of $105 implies a roughly 9% upside from the current level. However, due to the aforementioned tariff uncertainties, HSBC analysts have taken a more cautious stance on UPS’s stock, leading to the downgrade to Hold from the previous Buy rating.
In other recent news, UPS reported its first-quarter 2025 earnings, surpassing analyst expectations with an earnings per share (EPS) of $1.49, compared to the anticipated $1.44. The company also exceeded revenue forecasts, posting $21.5 billion against the expected $21.22 billion. Despite this, UPS has suspended its full-year outlook due to ongoing trade uncertainties. In terms of analyst opinions, Stifel maintained a Buy rating for UPS, though it lowered the price target from $145 to $124, highlighting the economic challenges UPS faces. Loop Capital also adjusted its price target downward from $115 to $105, retaining a Hold rating, citing a decline in demand and uncertainties in China. Stephens followed suit, reducing the price target from $110 to $101, while maintaining an Equal Weight rating, and noted the expected 30% decrease in Amazon (NASDAQ:AMZN) volume in the latter half of 2025. UPS has announced plans to cut 20,000 positions and close 73 facilities by the end of June as part of a network realignment strategy. These developments reflect UPS’s efforts to manage operational challenges and adapt to changing market conditions.
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