UPS downgraded by BMO as B2B recovery remains elusive

Investing.com -- United Parcel Service shares have been downgraded by BMO Capital to Market Perform, citing persistent macroeconomic headwinds and challenges in the company’s U.S. network overhaul.

In a note to clients, BMO said, “A recovery in demand remains elusive, particularly in the important B2B segment. Macro challenges have been further heightened by shifting U.S. trade policies, including the ending of de minimis exemptions.”

The analysts pointed out that global trade conditions remain weak. “PMIs of the major economies that drive global trade remain in contraction territory, with limited visibility into an inflection point in the freight cycle,” BMO wrote.

Shifting U.S. trade policies, including higher tariffs, have hurt profitable China–U.S. trade lanes, pulling forward shipments and dampening expectations for the 2025 peak season.

Domestically, UPS continues a costly transformation of its delivery network, according to BMO.

The company is moving away from Amazon volumes and insourcing Surepost, while targeting $3.5 billion in cost savings by 2025.

However, BMO cautioned that “cost reductions are lagging the step-down in revenues, and Surepost volumes have proven more challenging to network density than originally expected.”

BMO lowered its earnings estimates for 2025 to $6.29 per share, down from $6.94, and to $6.86 for 2026, from $7.92. Consensus currently stands at $6.50 and $7.19, respectively.

“The timing of our shift to a more constructive outlook on UPS proved to be wrong, as the expected recovery in the freight cycle, specifically B2B, did not materialize in 2025,” the analysts admitted.

While they see potential improvement when B2B demand rebounds, trade uncertainty continues to cloud the outlook.

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