Analyst: New UPS CFO Brings Outsider Perspective

United Parcel Service, Inc. UPS has officially named former PepsiCo, Inc. PEP Latin America finance executive Brian Newman as its new CFO, and one analyst said Newman will bring a much-needed fresh perspective to the UPS team.

The Analyst

Bank of America analyst Ken Hoexter reiterated his Buy rating and $130 price target for UPS.

The Thesis

Hoexter said the unexpected retirement of former UPS CFO Richard Peretz came at a difficult time for the delivery giant. Peretz had been in the CFO role since 2015 and had 38 years of work experience with the company.

Hoexter said Newman likely has plenty of experience with complex logistics from his tenure at Pepsi.

“The decision to appoint Mr. Newman is notable, in our view, as UPS has typically drawn from its internal ranks for promotions to senior leadership, possibly indicating that the Board felt UPS would benefit from an outsider’s perspective,” Hoexter wrote in a note.

He's expecting a smooth transition given Peretz is planning to stay on board through December.

Airfreight carrier margins have been under pressure in recent years thanks to the rise of online retail, specifically Amazon.com AMZN. Amazon is even threatening to add its own transportation and logistics operation to the mix. UPS shares have lagged the S&P 500 over the past five years, and Hoexter says investor uncertainty has compressed UPS’s forward earnings multiple.

Hoexter said Newman’s primary near-term priority will likely be to keep Peretz’s Network Transformation initiatives on track to help UPS gain between $1.00 and $1.20 in EPS by 2022.

Price Action

UPS shares traded lower by 1.3% to $114.27 on Wednesday.

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