Bank of America Securities analyst Ken Hoexter has reaffirmed a "buy" rating for United Parcel Service (UPS, Financial) but has lowered the price target by 3% to $129. The adjustment comes amid uncertainties related to tariffs and winter weather, which may result in an 8% decline in domestic business volume when UPS reports its first-quarter earnings.
Hoexter anticipates that UPS will lose 50% of its business with Amazon by mid-2026. However, as UPS integrates the remaining 50% of its SurePost volume, shipping rates are expected to rise. Consequently, he has reduced the first-quarter earnings per share (EPS) forecast by 15% to $1.31 and the 2025 EPS estimate by 6% to $7.40.
UPS noted that January trends exceeded targets, but volumes in February and March remained stagnant. The company is hesitant to cut structural costs beyond current targets, expecting temporary tariff-related demand freezes to ease.
Hoexter also projects that UPS's adjusted operating profit for its international business in the first quarter will be $643 million, a 12% decrease from the previous estimate of $733 million. The operating profit margin is expected to drop from 17% to 15%.
Despite these challenges, Bank of America Securities maintains a "buy" rating for UPS, citing anticipated aggressive structural cost reductions. The revised price target of $129 corresponds to 17.5 times the 2025 EPS estimate.
As of the latest market close, UPS shares fell 5.05% to $109.95, marking a 12% decline for the year.
