Downgrades FedEx on trade risk, upgrades UPS on domestic delivery

Cargo aircrafts coming from UPS, FedEx and also also also West Air Europe are parked at Cargo City at Arlanda airport in Stockholm.

Johan Nilsson | AFP | Getty Images

Cargo aircrafts coming from UPS, FedEx and also also also West Air Europe are parked at Cargo City at Arlanda airport in Stockholm.

UBS swapped out its pick of parcel delivery services Monday, raising its near-term outlook on UPS stock to a “buy” rating while lowering its rating on shares of FedEx to “neutral.”

FedEx “is actually exposed to risk coming from tariffs and also also also potentially slower trade activity,” UBS analysts wrote in a note. About 55 percent of FedEx revenue stems coming from its “global Express business,” and also also also UBS does “not expect” to see benefits coming from the company’s $4.8 billion acquisition of TNT Express to “show up inside next few quarters.”

On the additional hand, UPS has “multiple ways to win,” the firm said. UBS believes the company may be poised to show “much better Domestic Package margin performance and also also also stronger operating income growth” next year, as UPS benefits coming from a more cost-effective business and also also also increasing revenue.

“We expect UPS’s Transformation initiative to generate significant cost savings,” UBS said. of which, along with UPS’ expected $800 million to $1 billion “network initiatives,” the item said, “can support a transition to Domestic Package margin improvement in 2019” after the company’s “weak margin performance the past several years.”

UBS lowered its cost target on FedEx to $256 per share coming from $283 per share and also also also raised its cost target on UPS to $125 per share coming from $121 per share.

Shares of UPS closed up over 1 percent in trading and also also also have fallen over 5 percent of which year, while FedEx stock closed down 1.5 percent, down over 7 percent of which year.

While the UPS agreement with Teamsters has yet to be finalized, UBS wrote of which the item “may also facilitate growth.”

“[A partnership with Teamsters] provides a labor cost structure which allows UPS to be more aggressive in offering Saturday & Sunday delivery,” the firm said.

inside case of both companies, UBS said “the Amazon risk” was “a long term factor.”

Leave a Reply

Your email address will not be published. Required fields are marked *

*

6 + eighteen =