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UPS Higher as J.P. Morgan Upgrades on Pricing, Capacity

J.P. Morgan upgraded UPS to overweight after its Investor Day Wednesday provided 'incremental positives' for pricing power and capacity discipline.
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United Parcel Service  (UPS) - Get Report shares rose on Thursday after J.P. Morgan upgraded the delivery giant to overweight from neutral and raised its share-price target to $243 from $224.

The move came “after the 2021 Investor Day [Wednesday] provided incremental positives around pricing power, capacity discipline, and the dividend yield,” wrote J.P. Morgan analyst Brian Ossenbeck.

“The upgrade completes our positive bias on parcel pricing power that started in July 2020. …

“Last week we highlighted a downside bias to UPS from the investor event, and we see an attractive entry point after it underperformed the market by [7 percentage] points and broader industrials by [2 percentage] points.”

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UPS recently traded at $202.92, up 0.9%. The stock has climbed 19% over the past six months. It fell 4% Wednesday on a disappointing profit margin forecast.

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“We have a healthy respect for what the cycle peak can do to cyclical valuations (see our truckload downgrades from July and October 2020), but simply believe it is too early for a similar concern in parcels,” Ossenbeck said.

UPS also drew positive comments from analysts at Credit Suisse, Barclays and Deutsche Bank.

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In April, UPS delivered better-than-expected first-quarter profit, though it opted to hold back on guidance amid what it called continued economic uncertainty.

Atlanta-based UPS posted adjusted net income of $5.47 a share, tripling the FactSet analyst consensus of $1.72 a share.

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