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UPS Stock Rises on Stifel Upgrade Ahead of Holiday Season

Shares of UPS traded higher after investment firm Stifel upgraded the package-delivery major to buy.

Shares of United Parcel Service  (UPS) - Get United Parcel Service, Inc. Class B Report edged higher Thursday after Stifel analyst upgraded the package delivery giant to buy from hold and raised its price target, citing the outlook for a solid peak season.

"UPS may become more than just a stable free cash flow generator, as new leadership appears to be looking at growth in a more attractive way for shareholders, including free cash flow, margins, and returns over time as preferred to volume and network growth," Stifel analyst J. Bruce Chan told investors.

"Doing more with the extensive network already built and the people in place could drive margin opportunity over the next few years," Chan wrote.

The analyst raised his price target on UPS to $224 a share from $184. He said that the stock could rise over 20% against a backdrop of healthy peak demand.

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At last check shares of the Atlanta company were trading at $190.07, up 3.3%. UPS shares have risen 12% in 2021 through Wednesday's close.

UPS in March last year named former Home Depot  (HD) - Get Home Depot, Inc. (HD) Report executive Carol Tome as chief executive.

Chan credited UPS with a better and more disciplined capital allocation strategy compared with rival FedEx  (FDX) - Get FedEx Corporation Report

The method has helped UPS deliver in an extremely tight operating environment, one "in which FedEx is likely to struggle more acutely for a quarter or two," said Chan.

The U.S. Postal Service, FedEx and UPS have released their recommended dates by which customers should ship, to ensure that packages and other shipments arrive before the Christmas holidays, the Wall Street Journal reported on Wednesday.