On Tuesday, UBS expressed continued confidence in UPS (NYSE:UPS), maintaining a Buy rating and a $175.00 price target on the company’s stock. The firm adjusted its second-quarter earnings per share (EPS) estimate from $2.00 to $1.95, which remains in line with the consensus of $2.00. The revision reflects an anticipated $350 million sequential improvement in domestic package business EBIT from the first to the second quarter, outpacing the typical seasonal uptick by about $100 million.
The UBS analyst highlighted the Fit to Serve program as a significant factor in driving the estimated $200 million in sequential cost reductions for the second quarter. The slight decrease in EPS forecast is attributed to expectations of a less robust revenue performance in the Domestic Package business segment during the quarter.
UPS shares are currently trading at a price-to-earnings (P/E) ratio of 14.8 times based on UBS’ forward EPS estimate. The company’s position is that UPS’s diligent execution of cost-cutting initiatives and expected sequential margin improvement are the primary catalysts for the stock’s performance. UBS applies a 17x P/E multiple to its 2025 EPS estimate of $10.30 per share to arrive at the target price of $175.00, reiterating a positive outlook on UPS.
In other recent news, FedEx Corporation (NYSE:) has seen its stock surge following a promising annual earnings forecast. The company is exploring strategic options for its less-than-truckload business, a move that analysts believe could be beneficial to shareholders. FedEx’s earnings projection for fiscal year 2025 is between $20 and $22 per share, beating the average analyst estimate. This positive outlook is attributed to cost-saving measures that are expected to result in savings of $2.2 billion. Analysts at Bernstein and Jefferies have reacted positively to these developments, suggesting potential value for shareholders.
United parcel UPS Service (NYSE:) has maintained its Outperform rating and a $157.00 price target following the recent announcement of the sale of its Coyote Logistics Truck Brokerage business to RXO for $1.025 billion. The transaction is expected to be completed by the end of the year and UPS plans to review its financial outlook following the close of the deal. BMO Capital Markets, Susquehanna and Oppenheimer have all raised their price targets for UPS stock following the release of UPS’s first quarter earnings, which beat consensus expectations.
Numerous North American companies, including Amazon (NASDAQ:) and UPS, are making significant staff reductions. UPS also announced the departure of its CFO, Brian Newman, and is looking for his replacement. Despite these changes, UPS has reaffirmed its financial guidance for the full year. These are recent developments in the business landscape.
InvestingPro Insights
While UBS maintains a bullish stance on UPS with a price target of $175.00, InvestingPro data provides a broader picture of the company’s financial health and market position. UPS is currently valued at a market capitalization of $115.55 billion, with its price-to-earnings ratio having adjusted over the past twelve months to 16.88, reflecting a market that is keeping an eye on the company’s earnings power. Notably, UPS’s dividend yield stands at an attractive 4.8%, which is a testament to its commitment to returning value to shareholders, having increased its dividend for 14 consecutive years and maintained payouts for 26 years.
InvestingPro tips highlight UPS as a prominent player in the air freight and logistics industry, operating with a moderate level of debt and trading near its 52-week low, which could present a value opportunity for investors. Additionally, analysts predict profitability for the year, backed by a track record of profitability over the past twelve months. For those looking to dig deeper into UPS’s potential, there are 9 additional InvestingPro tips available, offering a nuanced understanding of the stock’s outlook. Interested investors can use the coupon code News 24 Get up to 10% off an annual Pro subscription and an annual or bi-annual Pro+ subscription to learn even more.
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