© Reuters. UPS (UPS) Gains as UBS Raises Shares to Buy
Shares of UPS (UPS) rose more than 4% on Tuesday after UBS upgraded the stock to Buy from Neutral, raising the price target to $175 from $160 per share.
UBS analysts told investors that UPS is a “cost narrative” and that expectations for the company are currently low.
“We expect management to deliver a strong cost reduction program to support margin expansion and attractive earnings per share growth despite facing a backdrop of moderate revenue growth,” UBS analysts said.
“We expect UPS' March 26 analyst meeting to provide greater visibility to cost savings and act as a catalyst for a stronger valuation,” they added.
The significant drop in UPS shares is due to its Q4 report and earnings per share forecast, suggesting that investor expectations are low,” according to UBS.
“We also believe investors may be skeptical about UPS's ability to deliver stronger performance in 2H24 and achieve margin performance of over 10% in 4Q24,” UBS analysts commented. “In contrast, we expect UPS to deliver strong cost reductions, which would support domestic package margin growth in 2H24 and margin performance of over 10% in 2025E.
UBS forecasts a 10.4% domestic margin in 2025 for UPS, which is a key factor supporting the bank's forecast of $10.30 per share.
