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UPS Investors Overlook 'Consistent Profitable Growth' In Face Of Macro Environment: Deutsche Bank

Stock Markets Nov 29, 2022 19:10
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© Reuters. UPS Investors Overlook 'Consistent Profitable Growth' In Face Of Macro Environment: Deutsche Bank
 
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Benzinga - United Parcel Service Inc (NYSE: NYSE:UPS) shares may be ripe for a buying opportunity as investors focus on headwinds and overlook the profitable growth opportunity ahead, according to a newly bullish analyst.

What To Know: Deutsche Bank (ETR:DBKGn) on Tuesday upgraded UPS from Hold to Buy and raised the price target from $197 to $220.

"It's easy to be neutral or negative on UPS in the current environment, but in our experience that's exactly the time to get more positive," Deutsche Bank analysts wrote in a note to clients.

Deutsche Bank downgraded UPS last year on changing macro environment concerns and impending labor contract negotiations. With the stock down nearly 15% year-to-date, the analyst firm said its previous concerns are now fully reflected in the stock.

In the near term, Deutsche Bank sees investors as overly focused on volume growth and not on mix and productivity initiatives. The firm believes the latter can drive positive revenue growth and solid contribution margins despite modestly lower domestic volumes.

Deutsche Bank noted that UPS has expanded its margins in three consecutive quarters despite volumes being down and costs accelerating. There also appears to be numerous levers for UPS to pull to allow consistent positive operating leverage, the analysts added.

"The bottom line is UPS shares appear to us as overindexing transitory headwinds rather than the structural opportunity for consistent profitable growth. While this is completely understandable in the current macro environment, we feel we're closer to the point where shares can get better credit for the sustainable returns being generated," Deutsche Bank said.

From Last Month: If The Drop In Demand Is Real, Why Is UPS Handling It So Much Better Than FedEx?

UPS Price Action: UPS has a 52-week high of $233.72 and a 52-week low of $154.87.

The stock was up 1.58% at $182.83 at the time of writing, according to Benzinga Pro

Photo: Takahiro Nagao from Flickr.

Latest Ratings for UPS

DateFirmActionFromTo
Feb 2022KeybancMaintainsOverweight
Jan 2022Exane BNP Paribas (EPA:BNPP)UpgradesUnderperformNeutral
Dec 2021 Citigroup (NYSE:C)UpgradesNeutralBuy
View More Analyst Ratings for UPS

View the Latest Analyst Ratings

© 2022 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

Read the original article on Benzinga

UPS Investors Overlook 'Consistent Profitable Growth' In Face Of Macro Environment: Deutsche Bank
 

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