Truist Securities has adjusted its price target for United Parcel Service (UPS, Financial), lowering it from $140 to $130 while maintaining a Buy rating on the stock. This adjustment is part of a comprehensive review focusing on the Transportation & Logistics sector.
The revision reflects a less optimistic economic environment impacting the sector, with a freight recession persisting for over 30 months. Despite this downturn, the overall industry tonnage index is expected to remain stable through 2024 and into 2025. This stability is attributed to consistent growth in U.S. GDP, retail sales, and e-commerce volumes.
However, even with the steady demand for goods transportation, Truist notes that pricing pressures in the truckload market have been significant. This trend suggests that while the volume of goods remains strong, competitive pricing is challenging the profitability of logistics companies like UPS.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 28 analysts, the average target price for United Parcel Service Inc (UPS, Financial) is $122.69 with a high estimate of $150.00 and a low estimate of $80.00. The average target implies an upside of 26.21% from the current price of $97.21. More detailed estimate data can be found on the United Parcel Service Inc (UPS) Forecast page.
Based on the consensus recommendation from 32 brokerage firms, United Parcel Service Inc's (UPS, Financial) average brokerage recommendation is currently 2.3, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for United Parcel Service Inc (UPS, Financial) in one year is $151.82, suggesting a upside of 56.18% from the current price of $97.21. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the United Parcel Service Inc (UPS) Summary page.
UPS Key Business Developments
Release Date: January 30, 2025
- Fourth Quarter Revenue: $25.3 billion, an increase of 1.5% year-over-year.
- Fourth Quarter Operating Profit: $3.1 billion, an increase of 11.2% year-over-year.
- Fourth Quarter Operating Margin: 12.3%, an increase of 110 basis points year-over-year.
- Diluted Earnings Per Share (Q4): $2.75, up 11.3% year-over-year.
- Full Year 2024 Revenue: $91.1 billion, slightly above last year.
- Full Year 2024 Operating Profit: $8.9 billion.
- Full Year 2024 Operating Margin: 9.8%.
- Cash from Operations (2024): $10.1 billion.
- Shareholder Returns (2024): $5.9 billion in dividends and share repurchases.
- US Domestic Operating Margin (Q4): 10.1%, an increase of 80 basis points year-over-year.
- International Segment Operating Margin (Q4): 21.6%, an increase of 210 basis points year-over-year.
- Supply Chain Solutions Operating Margin (Q4): 9.3%, an increase of 20 basis points year-over-year.
- Global DAP Revenue (2024): $3.3 billion, a 17% increase year-over-year.
- SMB Penetration (2024): 28.9% of total US volume, an increase of 30 basis points from last year.
- Capital Expenditures (2024): $3.9 billion.
- Debt Repayment (2024): $3.8 billion.
- Share Buybacks (2024): $500 million.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- United Parcel Service Inc (UPS, Financial) achieved a 1.5% increase in consolidated fourth-quarter revenue to $25.3 billion, with an 11.2% rise in operating profit, surpassing expectations.
- The company maintained its industry leadership in on-time service during the peak season for the seventh consecutive year, demonstrating strong operational efficiency.
- UPS's Digital Access Program (DAP) generated $3.3 billion in global revenue, marking a 17% year-over-year increase, contributing to the growth in US SMB penetration.
- The acquisition of Frigo-Trans and the opening of healthcare cross-dock facilities in Europe expanded UPS's cold chain capabilities, supporting growth in the healthcare logistics market.
- UPS's strategic initiatives, including Efficiency Reimagined, are expected to drive approximately $1 billion in savings, enhancing profitability and operational agility.
Negative Points
- UPS faces challenges in the US small package market, which is experiencing slow growth and changing package characteristics, potentially impacting future returns.
- The company is significantly reducing its volume with its largest customer, Amazon, by more than 50% by the second half of 2026, which could lead to lower revenue in the near term.
- UPS's reliance on USPS for its SurePost product is at risk due to changes in USPS's operating model, prompting UPS to in-source this product, which may affect service and costs.
- The prolonged labor negotiation with the Teamsters in 2023 caused volume and earnings disruption, highlighting potential labor-related risks.
- UPS's 2025 revenue is expected to decline by 2.3% year-over-year, driven by an 8.5% reduction in average daily volume, indicating potential challenges in maintaining growth momentum.
