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Raymond James Upgrades UPS On Underappreciated Outlook

Raymond James Upgrades UPS On Underappreciated Outlook

Based on an underappreciated free cash flow outlook, analysts upgraded United Parcel Service, Inc. (NYSE: UPS).

The Analyst

Raymond James analyst Patrick Tyler Brown upgraded UPS from Market Perform to Strong Buy with a new price target of $150.

The Thesis

This upgrade was driven by the market’s underappreciation of UPS's long-term domestic earnings and free cash flow projections.

Brown anticipates earnings amounting to $5.7 billion by 2021, based on specific company factors such as:

  • The “peel off” of over $200 million in operating penalties.
  • Smart Global Logistics Network and over $900 million in cost savings.
  • A benefit of $150 million from the company’s retirement plan.
  • Organic growth, including up to 3 percent pricing and single digit volume gains.

Domestic growth aside, Brown remains optimistic of international business, as well.

“While much less noisy, we believe the international pipeline remains ripe, anchored by UPS’ European operations where investments (~$2B) in a panEuropean network continue to bear fruit,” Brown said. “Further, given favorable package characteristics (larger mix of B2B), increased demand in premium (higher priced) products, & ample opportunities in Asia (also owed to the JV with SF Express), we surmise strong international EBIT growth will persist through the decade- absent a draconian change in trade policies.”

Incremental upsides, such as positives from transformation, the new five-year teamster contract and a possible discount rate reversal remain possible, Brown said.

Price Action

UPS shares were up marginally at $123.88 Tuesday afternoon.

Related Links

Analyst: UPS Network Overhaul Could Improve Margins

UPS Pilots Keyless Deliveries In New York City

Public domain photo via Wikimedia.

Latest Ratings for UPS

May 2021Wolfe ResearchUpgradesPeer PerformOutperform
Apr 2021BMO CapitalUpgradesUnderperformMarket Perform
Apr 2021Morgan StanleyMaintainsUnderweight

View More Analyst Ratings for UPS
View the Latest Analyst Ratings


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