UPS (UPS) PT Raised to $133 at Bernstein SocGen Group

Bernstein SocGen Group analyst David Vernon raised the price target on UPS (NYSE: UPS) to $133.00 (from $130.00) while maintaining a Outperform rating.

The analyst comments "The market is expecting a modest beat when UPS reports next week, and remains concerned about visibility into 2H. While there is always the potential for another shoe to drop, the carryover on recent cost actions for 2027 is considerable and should put upward pressure on forward estimates as we move through the end of the year. 2Q should be solid. A stronger international market (AI build, pull forwards, DHL read across) and higher fuel (new surcharge table) have investors expecting modest upside to sellside consensus, and we would peg the buy-side EPS benchmark for 2Q at ~$1.70. Domestic margins are expected at the midpoint of the range — 8% — and the market may not take fuel for an answer if they miss (skepticism remains high). We think they do a little better at $1.74 on less volume (see revised Amazon glide down math in Exhibit 2 and expectations / RPP builds in Exhibit 3 to Exhibit 5). Investors remain concerned about 2H ramp. UPS has pitched this as a year of two halves, and the market is not having it. Street remains concerned about getting back to flat earnings after the first half profit decline, and is questioning the ability to grow once this glide down is behind us. Bottoms up math on cost out says 3Q is the turning point, with $750-800M of carry over into 2027. Netting lost revenue against cost take out by quarter, we see 3Q as a clear inflection point (Exhibit 7). More importantly, this math says that the carry forward to next year domestic EBIT growth should be in the range of $750-800M (Exhibit 8). While there is always the possibility (or some might argue, probability) that another shoe will drop, the pain taken this year should annualize to very strong 1H tailwinds in 2027."

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