On Wednesday, Bernstein SocGen Group indicated a positive outlook for UPS (NYSE:UPS) by raising its price target from $172.00 to $179.00, while keeping an Outperform rating on the stock. The adjustment follows a period where Parcel & Airfreight sectors underperformed the S&P 500 year-to-date, as they contended with delayed Federal Reserve cuts and navigated through a freight recession in 2024.
Analyst David Vernon highlighted UPS's strong position, noting that the company has clear visibility on unit cost inflation. According to Vernon, UPS is expected to experience less margin pressure from labor contracts and product mix, allowing pricing actions to more effectively improve the bottom line. He expressed confidence that UPS's goal of achieving a margin greater than 12% is more attainable within the next year, which should support a higher valuation multiple and positive earnings revisions.
The revised price target of $179 is based on a 15.5 times multiple applied to the next twelve months plus one adjusted earnings per share (EPS) of $11.53, which is an increase from the previously estimated $10.75 EPS. Vernon's analysis suggests that these factors justify a more optimistic valuation for UPS.
The report from Bernstein comes as the industry looks forward to a potentially more favorable setup in 2025 compared to the challenges faced in the previous year. UPS's strategic pricing actions and cost management efforts are anticipated to contribute to stronger financial performance and shareholder value in the coming months.
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The report from Bernstein comes as the industry looks forward to a potentially more favorable setup in 2025 compared to the challenges faced in the previous year. UPS's strategic pricing actions and cost management efforts are anticipated to contribute to stronger financial performance and shareholder value in the coming months.
In other recent news, FedEx (NYSE:FDX) has been making significant strategic decisions, including the spin-off of its Less-Than-Truckload (LTL) division.
This move has been perceived by Stifel and other firms as a potential value unlock. Despite not meeting all earnings estimates, FedEx maintains solid fundamentals with an EBITDA of $10.9 billion over the last twelve months. However, the company revised its annual EPS guidance downward, prompting ten analysts to adjust their earnings estimates for the upcoming period.
FedEx has also announced a debt exchange offer as part of its strategic moves. The new notes issued will be guaranteed by the same subsidiaries that currently guarantee the existing notes. The exchange offers include a variety of senior notes with maturity dates ranging from 2028 to 2065, allowing eligible holders to exchange existing notes for new ones with the same interest rates and maturity dates.
Following these developments, several financial firms have adjusted their targets for FedEx. Stifel raised its FedEx target to $368, maintaining a buy rating. TD Cowen raised its target to $337, BMO Capital to $330, and Bernstein SocGen Group modestly increased FedEx's target to $320. However, Stephens reduced its FedEx target to $345, but maintained an overweight rating. Loop Capital upgraded FedEx to Buy, significantly raising the target to $365, factoring in operational efficiencies and anticipated benefits from the LTL Freight business spinoff.
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