UPS Is Uniquely Positioned To Capitalize On E-Commerce Tailwinds & Drive Revenue Growth, Analyst Says

  • Raymond James analyst Patrick Tyler reiterated a Strong Buy rating on the shares of United Parcel Service Inc (NYSE: UPS) and lowered the price target from $210 to $207.

  • The company reported 4Q22 adj. EPS of $3.62, beating the estimates, driven by yield/margin initiatives.

  • Revenue and Adj. EBIT were both slightly below Street expectations, though company-wide operating margins of 14.1% remained solid.

  • The analyst said the Domestic segment continues to outperform despite the uncertain volume environment as margins came in at 12.8%.

  • From where management stands today, it is broadly expecting lower volumes and slightly weaker margins in 2023, said the analyst.

  • While the volume side of the equation is relatively outside its control, management remains focused on controlling the controllable, which stems from productivity and mix initiatives, the analyst remarked.

  • On productivity, UPS is accelerating its investments into its smart package/smart facility initiative, which is now expected to be completed at the remaining 900 facilities by the end of the year, enhancing productivity, said the analyst.

  • With consternation around the upcoming labor negotiations beginning to swirl, management is confident it can create a win, win, win scenario for UPS, its employees, and the Teamsters, the analyst said.

  • As the domestic leader in the evolving parcel arena, the analyst continues to believe that UPS is uniquely positioned to capitalize on e-commerce tailwinds and is set to drive continued revenue growth.

  • Price Action: UPS shares are trading lower by 1.74% at $182.01 on the last check Wednesday.

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