TLDR
- UPS stock price rose 1.1% in premarket trading after canceling Estafeta acquisition
- BMO Capital Markets downgraded UPS stock rating to Market Perform from Outperform
- Analyst cut UPS stock price target to $96 from $125 citing demand recovery challenges
- FedEx earnings beat estimates, providing positive momentum for UPS stock
- Company continues $3.5 billion cost-cutting plan including 20,000 job reductions
UPS stock gained momentum in Friday’s premarket session despite facing headwinds from a major analyst downgrade. The logistics stock climbed 1.1% before market open.
The UPS stock movement came after the company terminated its planned acquisition of Mexico’s Estafeta. UPS disclosed in regulatory filings that closing conditions could not be satisfied.
UPS first announced the Estafeta deal in July 2024. The company expected to complete the acquisition during the first half of 2025.
BMO Capital Cuts UPS Stock Rating
BMO Capital Markets delivered a double blow to UPS stock Friday morning. The investment firm downgraded shares to Market Perform from Outperform.
BMO also slashed its UPS stock price target to $96 from $125. The 23% reduction reflects growing concerns about the company’s recovery trajectory.
The analyst cited an “elusive” demand recovery in UPS’s business-to-business segment. This market represents a crucial revenue source for the shipping giant.
BMO pointed to macroeconomic challenges and shifting U.S. trade policies as key headwinds. The firm specifically mentioned ending de minimis exemptions affecting cross-border shipments.
UPS stock has declined 25% over the past six months according to market data. Shares currently trade near 52-week lows despite maintaining dividend growth.
Cost-Cutting Measures Progress Slowly
UPS stock faces pressure as cost-saving initiatives materialize gradually. The company’s network realignment toward small and medium businesses continues.
Management plans to eliminate approximately 20,000 positions this year. UPS will also close 73 leased and owned buildings by year-end.
These UPS stock supporting measures target $3.5 billion in total cost savings. However, BMO analysts noted progress has been slower than anticipated.
Network density challenges have emerged as UPS insources its Surepost service. The transition creates execution risks for the logistics provider.
UPS stock maintains a 7.71% dividend yield despite recent performance struggles. The company has raised dividends for 15 consecutive years.
FedEx’s strong fiscal first quarter results likely supported UPS stock gains. The rival topped Wall Street estimates on robust domestic demand and cost controls.
UPS reported adjusted second-quarter earnings of $1.55 per share. This fell slightly below consensus estimates of $1.56.
Following mixed Q2 results, UPS management withdrew 2025 guidance. The company cited market uncertainty for pulling forward projections.
Other analysts maintain more optimistic UPS stock outlooks. UBS kept its Buy rating with a $118 price target, citing cost-cutting progress and strategic adjustments.
