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Nomura Securities Assumes UPS (UPS) at Neutral

May 28, 2015 7:26 AM EDT
Get Alerts UPS Hot Sheet
Price: $151.69 -1.1%

Rating Summary:
    16 Buy, 19 Hold, 2 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 20 | Down: 14 | New: 22
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Nomura Securities assumes coverage on UPS (NYSE: UPS) with a Neutral rating and a price target of $110.00.

Analyst Matt Troy commented, "With a dominant No.1 market share in the U.S. ground parcel delivery market and a solid No. 2 position in Europe, UPS should continue to drive industryleading margins (~12%), ROIC (~30%), and FCF conversion (~7% of revenue) well ahead of peers while bolstering its sizeable cash balance of $6.4bn (as of 1Q15) and supporting a targeted strategy of returning 100% of net income to shareholders via dividends and share repurchases. Yet while cash is king, catalysts can be critical. Shares are down nearly 10% YTD. Following a challenging 2014, when EPS grew just 4%, consensus estimates for UPS look for earnings growth to level off in the ~10% range in 2015 and 2016. While multiyear productivity initiatives (Project ORION, Hub Modernization, Dimweight & Peak Pricing, SurePost, Access Points) should gradually bear fruit, we believe the law of large numbers and the slow nature of economic growth both here and abroad will continue to restrain the potential for meaningful EPS acceleration near term. Transports are a cyclical industry, in which investors have typically been willing to capitalize “story stocks” at a premium given their ability to generate earnings growth independent of the economic cycle. With the perceptual wind at rival FedEx’s back due to restructuring traction there, and lingering concerns about the mix implications of faster growth in B2C shipments and UPS’s struggles during recent holiday peaks, we’d remain on the sidelines and assume coverage at Neutral and PT of $110."

For an analyst ratings summary and ratings history on UPS click here. For more ratings news on UPS click here.

Shares of UPS closed at $100.92 yesterday.



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