Proactive Investors - United Parcel Service Inc (NYSE:UPS)'s reduction of its full-year 2023 revenue and operating margin guidance has prompted Bank of America (NYSE:BAC) (BoA) analysts to lower their price target on the stock from $167 to $152.
UPS shares traded hands at about US$137 on Friday afternoon and are down 9.1% this week after the parcel delivery company’s third quarter earnings were negatively impacted by weaker demand and the broader unfavorable macroeconomic conditions.
The analysts wrote in a note to clients that they are now taking a more conservative earnings view for UPS, reiterating their ‘Neutral’ rating on the stock.
The BoA lowered their fourth quarter, 2023, 2024 and 2025 earnings per share (EPS) estimates by 12%, 4%, 6%, and 5% to $2.69, $9, $9.85, and $11.20 from $3.06, $9.35, $10.45 and $11.80, respectively.
They noted that UPS’ reduced 2023 outlook reflects greater macro pressure, volume diversion ahead of the September Teamster contract and higher labor costs, as the company added to its headcount earlier to prepare for the peak holiday season.
Additionally, they highlighted finance chief Brian Newman’s comments that UPS reclaimed 40% of diverted package volumes, being packages diverted to rival parcel delivery companies like FedEx (NYSE:NYSE:FDX) during its contract negotiations with the Teamsters union.
“CEO Carol Tome sees no material cost impact from winning back its business, and it is working to win all diverted business back by year-end,” they wrote.
“This is contrary to FedEx Corporation (NYSE:FDX)'s view that it will retain a majority of its about 400,000 packages per day won though, as UPS' lost volumes increased to 1.5 million in September from 1.2 million in August, suggesting room for both comments.”