United Parcel Service Shares Gain After Q4 Earnings Beat; Target Price $182

United Parcel Service, the world’s No. 1 express carrier and package delivery company, reported better-than-expected earnings in the fourth quarter of 2020 as home delivery surged during the holiday period amid COVID-19 pandemic, sending its shares up about 4% in pre-market trading on Tuesday.

Atlanta, Georgia-based package delivery company said its adjusted net income climbed to $2.33 billion, or $2.66 per share, beating the Wall Street consensus estimate of $2.11 per share, also, up from $1.84 billion, or $2.11 per share, seen in the same period a year ago.

The company’s total revenue surged 21% to $24.9 billion, led by growth from small and medium-sized businesses. Average daily volume grew 21.9%, with export growth from all regions, the company said.

United Parcel Service shares rose over 3.6% to $162.0 in pre-market trading on Tuesday; the stock rose over 40% in 2020.

Executive Comments

“As we look past 2020 into the new year, we are optimistic.  During the fourth quarter, we began transporting COVID-19 vaccines and we stand ready to deliver hope and health to people around the world,” said Carol Tomé, UPS chief executive officer.

United Parcel Service Stock Price Forecast

Six analysts who offered stock ratings for United Parcel Service in the last three months forecast the average price in 12 months at $182.17 with a high forecast of $201.00 and a low forecast of $155.00.

The average price target represents a 16.58% increase from the last price of $156.26. From those six analysts, three rated “Buy”, two rated “Hold”, and one rate “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $74 with a high of $200 under a bull scenario and $50 under the worst-case scenario. The firm currently has an “Underweight” rating on the package delivery company’s stock.

Several other analysts have also recently commented on the stock. United Parcel Service had its price target boosted by JP Morgan to $180 from $177. JP Morgan currently has a neutral rating on the transportation company’s stock. Zacks Investment Research lowered shares to a hold rating from a buy and set a $177.00 target price.

In addition, Credit Suisse Group set a $202.00 price objective on United Parcel Service and gave the company a buy rating. Bank of America lifted their price objective to $183 from $176 and gave the company a buy rating. Raymond James lifted their target price to $195 from $165 and gave the company a strong-buy rating.

Analyst Comments

“We see competitive secular threats to the Parcel business as a triple threat of (1) Insourcing by eCommerce giants (2) Omnichannel shift enabling last-mile competition from mid-size retailers and (3) Platformization of small-shipper volumes. Together, these trends could erode returns in the B2C space, which has been a huge driver of growth for the legacy parcels in recent years. Despite its strong operating metrics, UPS could be more at risk of disruption given its larger B2C business (and AMZN exposure), fewer self-help initiatives than FDX and more expensive valuation,” said Ravi Shanker, equity analyst at Morgan Stanley.

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