Market Moves Toward UPS' Strengths Could Be Beneficial; Aegis Initiates At Hold

United Parcel Service, Inc. UPS should be able to generate above-trend EPS growth going ahead, since the company is “a meaningful beneficiary of the move toward eCommerce” and has had a consistent acquisition strategy over the past few years, Aegis Capital’s Jeffrey Kauffman said in a report. He initiated coverage of UPS with a Hold rating and a price target of $120.

UPS is a global market leaders in the parcel delivery space. Both UPS and FedEx Corporation FDX are “dominant global brands with structural advantages that no new competitor can erode in any short-term time frame,” analyst Kauffman commented. He added that the market seems to be moving “toward UPS’s strengths.”

EPS Growth Prospects

Forrester Research expects U.S. online retail sales to consumers to reach ~$373 billion in 2016, and to grow to as high as $500 billion by 2020. This represents a compounded annual growth rate of 7.6 percent.

Many of these business-to-consumer deliveries are handled by FedEx, UPS and the U.S. Post Office, Kauffman noted. He pointed out that although Amazon.com, Inc. AMZN grabs the media headlines, it accounts for less than 3 percent of U.S. parcel volume.

The analyst also highlighted that while the media focuses on the B2C market during the holiday season, the U.S. business-to-business e-commerce space represents “a much larger universe,” estimated at ~$830 billion, which Forrester expects to grow to $1.2 trillion by 2020.