UPDATE: UPS (UPS) Growth Drivers Seem to not be in Management's Control, Morgan Stanley Reiterates Underweight After Analyst Day

June 10, 2021 2:05 AM EDT
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Price: $203.81 +2.19%

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(Updated - June 10, 2021 6:57 AM EDT)

Morgan Stanley analyst Ravi Shanker raised the price target on UPS (NYSE: UPS) to $130.00 (from $120.00) after the company hosted their 2021 Analyst Day and issued 2023 LT guidance that represented a win at a high level but left the analyst looking for details. There were no real surprises and the content / message did not deviate much from past UPS analyst days despite the almost all-new management team which comes as somewhat of a disappointment. Management had indicated that “everything was on the table” and that no stone would be left unturned as part of the “Better not Bigger” strategy revamp.

The analyst maintained an Underweight rating noting the lack of details (and numbers) around guidance, cost savings, pricing strategy and competition. He stated "the biggest risk in our view from today – the biggest drivers of UPS’s ability to hit its guide appear to be outside its control. In our view, UPS cannot control what % of shoppers will return to stores or the timing of passenger planes returning to the sky. UPS cannot control what AMZN does with its volumes and internal capacity. UPS cannot control the pricing, mix and share gains from SMB if the rest of the market is going to be aggressive. If the guide was instead driven by a big cost driven/Rail PSR-like “cutting cost faster than topline is declining" strategy – that would be within their control (though not sustainable in the long term). This makes it very hard to have confidence that the guidance is conservative or even achievable".

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