In a note Thursday, analysts at HSBC upgraded UPS (UPS) to Buy from Hold, raising the price target to $170 from $150 per share.
UPS's first-quarter results beat expectations due to a tapering volume decline and an improving costs base. The company also reiterated full-year guidance, implying that 1Q was a trough quarter for UPS, according to HSBC.
The bank sees UPS's volumes and margins turning around from the second quarter, with the potential for a 2024 guidance upgrade to reflect an accretive USPS contract.
Furthermore, it is felt that this could restore confidence in UPS's 2026 guidance.
"For 2026, our forecast is 9% below the company's organic adj. OP target while consensus is 10% lower," said HSBC. "Recall that UPS did not meet its 2023 targets outlined in 2021. However, with the margin recovery and an uplift from the USPS contract, confidence in UPS's 2026 guidance may improve."
Overall, HSBC lifted its rating and target for UPS based on a higher multiple to reflect margin expansion and rollover to 2024 to 2025e EPS. They now see the focus shifting to EBIT recovery from the second half after seven quarters of year-on-year declines and the potential 2024 guidance upgrade on the USPS contract win.
Should you invest $2,000 in UPS right now?
Before you buy stock in UPS, consider this: ProPicks AI are 6 easy-to-follow model portfolios created by Investing.com for building wealth by identifying winning stocks and letting them run. Over 150,000 paying members trust ProPicks to find new stocks to buy – driven by AI. The ProPicks AI algorithm has just identified the best stocks for investors to buy now. The stocks that made the cut could produce enormous returns in the coming years. Is UPS one of them?
Reveal Undervalued Stocks Now