On Wednesday, Jefferies adjusted its price target for UPS (NYSE:UPS), lowering it to $175 from the previous $180 while maintaining a Buy rating on the stock. The firm's analyst cited the recent 2024 Analyst Day event held by UPS as a key factor in the decision.
Despite acknowledging the positive aspects of UPS's growth in Healthcare logistics and the company's margin targets meeting expectations, the analyst expressed reservations about the company's revenue growth projections, particularly in the US parcel Average Daily Volume (ADV) growth assumptions.
The analyst's assessment suggests that while UPS has set a target for 2026 earnings per share (EPS) of around $13, with US Domestic revenues growing to $70 billion, a more realistic forecast would be an EPS of $12 based on US revenues reaching $67.7 billion. This projection is based on the assumption that the stock is valued at 12 times the estimated 2026 EPS.
In the detailed review of UPS's financial targets, the analyst identified the disparity between the company's optimistic top-line growth assumptions and what is deemed more feasible. The updated price target reflects this reassessment of UPS's future revenue and earnings potential.
The report comes after UPS shared its vision and financial targets during the analyst day, aiming for significant growth and performance in the coming years. However, the market's reaction to the company's outlined goals and the analyst's subsequent price target adjustment indicates a more cautious outlook on the achievability of these targets.
Jefferies' new price target of $175, despite being a reduction from the previous figure, still implies confidence in UPS's stock performance with the continuation of a Buy rating. This suggests that while expectations have been tempered, the firm still sees UPS as a favorable investment.
InvestingPro Insights
As Jefferies recalibrates its expectations for UPS, current InvestingPro data and insights can provide additional context for investors. With a market capitalization of $124.1 billion and a P/E ratio that stands at 18.61, UPS showcases its significant standing in the market. Notably, the company's Price to Earnings (P/E) ratio has adjusted to 16.42 over the last twelve months as of Q4 2023, reflecting a more favorable valuation in comparison to the current P/E.
From a profitability standpoint, UPS has demonstrated resilience, maintaining a Gross Profit Margin of 22.96% over the same period. This aligns with the InvestingPro Tips highlighting UPS's profitability in the last twelve months and analysts' predictions that the company will remain profitable this year. Moreover, UPS's commitment to shareholder returns is evident, with a dividend yield of 4.53% as of the latest data, complemented by a history of raising its dividend for 14 consecutive years and maintaining dividend payments for 26 consecutive years.
Investors looking to delve deeper into UPS's financial health and future prospects may find value in the additional 6 InvestingPro Tips available, which cover aspects such as the company's industry position, debt levels, and valuation multiples. To access these insights, visit InvestingPro and consider using the exclusive coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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