Street Calls of the Week
Investing.com -- Bank of America downgraded UPS and FedEx on Friday, citing increased pressure on volumes and costs following the end of de minimis exemptions for shipments from China, Hong Kong, and the rest of the world.
UPS was cut to Underperform from Neutral, while FedEx was lowered to Neutral from Buy.
BofA highlighted that “nearly 4 million packages/day (~1.5 billion/year) were moving under US de minimis exemptions that ended on May 2 for packages from China/Hong Kong and ROW on August 29.”
The bank explained that the change affects international shipments, which represent about 16% of UPS’s and 17% of FedEx’s revenues.
BofA believes this “is expected to result in a muted air peak season in ’25 as the tight peak markets in ’23/’24 were driven by air demand from Chinese e-commerce players using the de minimis loophole.”
UPS faces added challenges as it sheds half its Amazon volumes, representing 11% of revenues. BofA noted that “since the May 2 end of China/HK de minimis, its May/June avg daily volumes fell 34.8% year-year on its US-China trade lane (its most profitable lane).”
UPS’ CEO Carol Tome highlighted uncertainty around peak season demand, small and mid-size business mix pressure, tariff policy, and voluntary labor separation.
BofA consequently cut UPS’ 3Q25, 2025, and 2026 EPS estimates by 6%, 3%, and 4%, lowering the price target to $83.
For FedEx, BofA cited “de minimis volume/margin pressure and sub-seasonal readthroughs from Less-than-Truckload peers,” trimming F1Q26, 2026, and 2027 EPS by 7%, 6%, and 7%, and cutting the price target to $240.
The firm added that upside risks remain if goods flows accelerate, Amazon slows its volume pullback, or UPS can accelerate cost cuts.
BofA stressed that structural volume declines combined with slower cost reductions have made both carriers more vulnerable in the near term.