Is UPS (NYSE: UPS) a Buy After Recent Earnings? Analyst Ratings and Future Outlook
UBS Raises Price Target for UPS
UBS analyst Tom Wadewitz has upgraded his price target for UPS shares from $159 to $170, maintaining a buy rating after the release of the latest earnings report. This new target represents a 25% premium over current prices and is among the more aggressive projections on Wall Street. Analysts believe that UPS’s recent performance metrics indicate a rebound could be on the horizon.
Positive Trends in Delivery Volume
One of the most encouraging signs for UPS is the 5.4% increase in delivery volume reported in the third quarter. This uptick is attributed to the easing of last year’s comparatives and an increase in revenue per piece (RPP). Additionally, UPS is strategically reducing capacity to align with demand by cutting jobs and optimizing locations, which has helped lower cost per piece (CPP) by 4.1%. Consequently, management has raised its full-year adjusted operating margin guidance from 9.4% to 9.6%, signaling confidence in improved efficiency.
UPS’s Future Potential
With a price-to-earnings (P/E) ratio of 18.1 times estimated earnings for 2024, UPS stock appears attractive, particularly considering the company’s potential for double-digit earnings growth in the coming years. Analysts anticipate that increased delivery volume, cost-cutting measures, and enhanced pricing power due to reduced industry capacity will contribute to UPS’s recovery.
However, the company still faces significant challenges, needing to achieve its full-year guidance of $2.95 billion in adjusted operating profit, especially after reporting $1.98 billion in the latest quarter. The persistent decline in RPP, coupled with lower-margin deliveries, suggests that the economic environment remains a hurdle.
Evaluating UPS Stock
Overall, while UPS presents an attractive valuation, investors should be aware of the potential risks associated with achieving the company’s full-year guidance. The stock’s current yield of 4.9% is sustainable as long as the company navigates through this challenging year effectively.
As investors consider adding UPS to their portfolios, understanding both the current financial landscape and the company’s operational adjustments will be crucial in making informed decisions.
The Motley Fool recommends United Parcel Service (UPS) but encourages potential investors to conduct their own research before making investment choices.
