JPMorgan Upgrades UPS After Recent Sell-Off


United Parcel Service, Inc.’s UPS 2021 Investor Day provided positive views on pricing power, capacity discipline and dividend yield, according to JPMorgan.

The United Parcel Service Analyst: Brian Ossenbeck upgraded the rating for UPS from Neutral to Overweight, while raising the price target from $224 to $243.

The United Parcel Service Thesis: Having underperformed the market by 700 basis points and broader industrials by 200 basis points last week, the share price now represents “an attractive entry point,” Ossenbeck said in the upgrade note.

“We have a healthy respect for what the cycle peak can do to cyclical valuations but simply believe it is too early for a similar concern in parcels,” the analyst wrote.

“UPS also debuted a new pricing strategy that utilizes fully-allocated costs and real-time capacity to set rates and enforce contract compliance. This announcement sends a strong signal to the market that pricing power still has momentum, which is positively correlated to parcel stock valuations,” he added.

“The other overlooked announcement was the dividend policy to pay out ~50% of prior year adjusted net income, which implies a potential +80bps increase to UPS’s yield in early 2022,” Ossenbeck further stated.

UPS Price Action: Shares of United Parcel Service had risen by 1.23% to $203.59 at the time of publication Thursday.

(Photo: United Parcel Service)

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Posted In: Analyst ColorUpgradesPrice TargetAnalyst RatingsBrian OssenbeckJPMorgan
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