UPS stock price target cut to $140 at BMO Capital

Investors and market watchers will be monitoring the impact of these changes on UPS’s financial performance in the coming years. The company’s efforts to improve its margin profile and ROIC through strategic adjustments to its business model are key points of interest. With a substantial dividend yield of 5.67% and moderate debt levels, InvestingPro subscribers can access 10+ additional exclusive insights about UPS’s financial health and growth potential through detailed Pro Research Reports. With a substantial dividend yield of 5.67% and moderate debt levels, InvestingPro subscribers can access 10+ additional exclusive insights about UPS’s financial health and growth potential through detailed Pro Research Reports.

The move to cut low-margin packages, particularly in the business-to-consumer (B2C) sector, which includes low-margin e-commerce deliveries, has been deemed overdue by BMO Capital. These types of deliveries have been putting structural pressure on UPS’s margins, return on invested capital (currently at 14%), and free cash flow conversion for more than a decade, despite the company maintaining strong revenue of $91.07 billion.

BMO Capital sees the strategy to optimize performance and redirect capital towards markets with higher ROIC as a necessary step for UPS. Although reducing volumes and simultaneously cutting structural costs might pose a challenge, the firm believes UPS will emerge in a stronger position after the overhaul.

The steps taken by UPS to address these long-standing issues indicate a strategic shift in the company’s approach to managing its delivery and service portfolio. By focusing on more profitable segments, UPS aims to enhance its financial health and operational efficiency.

Investors and market watchers will be monitoring the impact of these changes on UPS’s financial performance in the coming years. The company’s efforts to improve its margin profile and ROIC through strategic adjustments to its business model are key points of interest.

In other recent news, United Parcel Service Inc. (NYSE:UPS) has seen several significant developments. UPS reported fourth-quarter earnings for 2024 that exceeded expectations with earnings of $2.75 per share, surpassing the consensus estimate of $2.53. The company’s consolidated revenue met projections, and adjusted earnings before interest and taxes (EBIT) exceeded predictions in both U.S. Domestic and International segments.

Additionally, UPS has made a strategic decision to reduce its dealings with Amazon (NASDAQ:AMZN) by more than 50% by the second half of 2026. Analysts from firms such as TD Cowen, Citi, and Stifel have adjusted their price targets for UPS, reflecting the potential impact of this move on the company’s financials.

UPS also announced an efficiency plan aimed at saving approximately $1 billion in costs. This initiative, along with the decision to stop using the US Postal Service (USPS) for its SurePost service, signifies a major shift in the company’s operations.

These recent developments highlight UPS’s strategic efforts to adapt to changes in the logistics and package delivery landscape. Despite these changes, the company maintains a strong financial position, with a track record of consistent dividend increases and a current dividend yield of 4.87%.

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