On Tuesday, UBS expressed continued confidence in UPS (NYSE:UPS), maintaining a Buy rating and a $175.00 price target on the company's stock. The firm adjusted its second-quarter earnings per share (EPS) estimate down from $2.00 to $1.95, which is still in line with the consensus of $2.00. The revision reflects an anticipated $350 million sequential improvement in Domestic Package EBIT from the first to the second quarter, surpassing the typical seasonal uptick by approximately $100 million.
The UBS analyst highlighted the Fit to Serve program as a significant factor in driving sequential cost reductions estimated at $200 million for the second quarter. The slight decrease in the EPS forecast is attributed to expectations of a less robust revenue performance in the Domestic Package business segment during the quarter.
Currently, UPS shares are trading at a price-to-earnings (P/E) ratio of 14.8 times based on UBS's rolling forward EPS estimate. The firm's stance is that UPS's diligent execution of its cost reduction initiatives and the anticipated improvement in sequential margins are the primary catalysts for the stock's performance. UBS applies a 17 times P/E multiple to its 2025 estimated EPS of $10.30 per share to arrive at the $175.00 price target, reiterating a positive outlook on UPS.
In other recent news, FedEx Corporation (NYSE:FDX) has seen a surge in shares following a promising annual profit forecast. The company is exploring strategic options for its less-than-truckload business, a move analysts believe could be beneficial for shareholders. FedEx's fiscal 2025 earnings projection is between $20 to $22 per share, surpassing the average estimate by analysts. This positive outlook is attributed to cost-saving measures expected to result in $2.2 billion in savings. Analysts from Bernstein and Jefferies have reacted positively to these developments, suggesting potential value for shareholders.
United Parcel Service (NYSE:UPS) has maintained its Outperform rating and a $157.00 price target following the recent announcement of the sale of its Coyote Logistics Truck Brokerage business to RXO for $1.025 billion. The transaction is expected to be completed by the end of the year, and UPS plans to revise its financial outlook following the closure of the deal. BMO Capital Markets, Susquehanna, and Oppenheimer have increased their price targets for UPS shares following the release of UPS's first-quarter earnings, which exceeded consensus expectations.
Significant workforce reductions are being initiated by numerous companies across North America, including Amazon (NASDAQ:AMZN) and UPS. UPS also announced the departure of its Chief Financial Officer, Brian Newman, and is launching a search for his replacement. Despite these changes, UPS has reaffirmed its full-year financial guidance. These are recent developments in the business landscape.
InvestingPro Insights
As UBS maintains a bullish stance on UPS with a $175.00 price target, InvestingPro data provides a broader picture of the company's financial health and market position. UPS is currently valued at a market capitalization of $115.55 billion, with a P/E ratio that has adjusted over the last twelve months to 16.88, reflecting a market that is attentive to the company's earnings capabilities. Notably, UPS's dividend yield stands at an attractive 4.8%, which is a testament to its commitment to returning value to shareholders, having raised its dividend for 14 consecutive years and maintained payments for 26 years.
InvestingPro Tips highlight UPS as a prominent player in the Air Freight & Logistics industry, operating with a moderate level of debt and trading near its 52-week low, which could present a value opportunity for investors. Additionally, analysts predict profitability for the year, supported by a history of profitability over the last twelve months. For those looking to delve deeper into UPS's potential, there are 9 additional InvestingPro Tips available, offering a nuanced understanding of the stock's prospects. Interested investors can utilize the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription for even more insights.
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