On Monday, Citi reiterated its Buy rating and $158.00 price target for UPS (NYSE:UPS) stock, a $104 billion logistics giant currently trading near its 52-week low of $122.01. According to InvestingPro data, the company generated over $90 billion in revenue over the last twelve months.
The firm's analysis follows UPS's recent announcement that it has stopped using the US Postal Service (USPS) for its SurePost service. The decision was disclosed during UPS's third-quarter 2024 earnings call, where the company mentioned its efforts to reach a new agreement with USPS for SurePost. However, UPS also indicated that it was shifting more packages to its own network, thanks to improvements in its delivery algorithm that increased package density.
The SurePost service, which previously partnered with USPS, is now limited to the contiguous 48 states, as reflected on the UPS website. This change is seen as part of a broader move towards more aggressive pricing strategies within the parcel delivery industry, which was highlighted in a recent 2025 industry outlook. The outlook pointed to significant rate hikes by USPS as a positive development for the sector. UPS maintains a strong market position, offering investors a substantial 5.29% dividend yield.
While Citi acknowledges the potential for slightly higher short-term costs for UPS due to the separation from USPS, the firm views the move as a positive sign of a more rational pricing environment across the industry. The analyst commented on the implications of the new strategy, stating that despite the immediate cost implications, the change is indicative of a healthier industry approach to pricing.
InvestingPro analysis suggests UPS is currently undervalued, with analyst price targets ranging from $100 to $179. Discover 8 additional exclusive ProTips and comprehensive valuation metrics with an InvestingPro subscription.
In other recent news, United Parcel Service Inc. (NYSE:UPS) has experienced several significant developments. The company reported a 5.6% year-over-year increase in consolidated revenue, reaching $22.2 billion in the third quarter, and a 22.8% rise in consolidated operating profit to $2 billion. Analyst firms have provided varying assessments; BMO Capital Markets upgraded UPS from Market Perform to Outperform, while TD Cowen maintained its Hold rating.
In addition, UPS settled a $45 million penalty with the Securities and Exchange Commission (SEC) over charges related to the valuation of its UPS Freight business unit. The company also announced the acquisition of Frigo-Trans, aiming to enhance its healthcare logistics capabilities.
Furthermore, UPS is facing a significant change as the United States Postal Service (USPS) has chosen not to renew its service agreement for a portion of the UPS SurePost product. Analysts from Bernstein suggest that this could influence the parcel industry's pricing dynamics positively in the long term.
These are recent developments at UPS, highlighting the dynamic nature of the company's operations and market position.
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