TLDR
- UPS stock fell 5% on Tuesday following a price target cut by Bank of America analyst
- Investors worry about potential impact of Trump administration’s proposed tariffs on shipping volumes
- FedEx’s recent earnings miss and guidance cut heightened concerns about the logistics sector
- Despite Tuesday’s drop, UPS had gained 0.61% in the previous trading session
- Analysts project UPS Q1 earnings at $1.50 per share, representing 4.9% year-over-year growth
UPS shares experienced significant volatility this week. The logistics giant saw its stock tumble more than 5% on Tuesday, underperforming the broader market as the S&P 500 remained essentially flat.
This sharp decline came just one day after a modest gain. On Monday, UPS had climbed 0.61%, though this increase still lagged behind the S&P 500’s more robust 1.77% advance on that day.
The stark reversal highlights growing investor uncertainty about the logistics sector. Shipping companies are widely considered cyclical businesses due to their exposure to broader economic trends.
Analyst Adjustments
Bank of America Securities analyst Ken Hoexter triggered Tuesday’s selloff with a price target reduction. Hoexter trimmed his target from $133 to $129 per share.
Despite lowering the price target, the analyst maintained his “buy” recommendation on UPS stock. This suggests continued long-term confidence despite near-term headwinds.
The Zacks Consensus EPS estimate for UPS has fallen 1.79% over the past month. This decline in analyst optimism has contributed to UPS currently holding a Zacks Rank of #4 (Sell).
From a valuation perspective, UPS trades at a forward P/E ratio of 14.73. This represents a discount compared to the industry average of 15.52.
The company’s PEG ratio currently stands at 1.55. This metric, which factors in expected growth, is higher than the Transportation – Air Freight and Cargo industry average of 1.36.
Tariff Concerns
A major factor weighing on UPS shares is the potential impact of proposed tariffs. The Trump administration has promised to implement aggressive tariffs on imports.
Investors fear these trade measures could negatively affect shipping volumes across the logistics sector. As companies that service virtually all segments of the economy, both UPS and FedEx are particularly vulnerable to such policy shifts.
This concern reflects broader anxiety about how trade policies might disrupt supply chains. Any reduction in cross-border commerce could directly impact parcel carriers’ business.
The FedEx Effect
Compounding these worries was FedEx’s recent disappointing earnings report. Last Thursday, FedEx released its fiscal third quarter 2025 results.
While FedEx beat revenue expectations, it missed earnings projections. More troubling for investors, the company reduced both its revenue and earnings guidance for the full fiscal year.
This performance by UPS’s main competitor has cast a shadow over the entire logistics sector. Investors are reasonably assuming that if FedEx is struggling, UPS might face similar challenges.
Looking Ahead
Despite current pressures, analysts still expect UPS to show some growth. For the upcoming earnings report, UPS is projected to post earnings of $1.50 per share, representing year-over-year growth of 4.9%.
However, revenue is anticipated to decline. The consensus estimate points to revenue of $21.29 billion, indicating a 1.92% decrease from the same quarter last year.
For the full year, analysts forecast earnings of $7.81 per share. This would represent a modest increase of 1.17% from the previous year.
Annual revenue is expected to reach $88.36 billion, reflecting a decline of 2.98% compared to last year. These projections suggest continued pressure on the company’s top line.
The Transportation – Air Freight and Cargo industry currently holds a Zacks Industry Rank of 213. This places it in the bottom 16% of all 250+ industries tracked.
Research indicates that the top 50% of Zacks-ranked industries typically outperform the bottom half by a factor of 2 to 1. This industry positioning does not bode well for UPS in the near term.
In the month prior to Tuesday’s drop, UPS shares had lost 1.06%. This was still better than both the Transportation sector’s 3.93% decline and the S&P 500’s 5.73% fall during the same period.
Stay Ahead of the Market with Benzinga Pro!
Want to trade like a pro? Benzinga Pro gives you the edge you need in today's fast-paced markets. Get real-time news, exclusive insights, and powerful tools trusted by professional traders:
- Breaking market-moving stories before they hit mainstream media
- Live audio squawk for hands-free market updates
- Advanced stock scanner to spot promising trades
- Expert trade ideas and on-demand support
