UBS Lifts United Parcel’s PT On ‘Favorable’ Pricing Environment

Shares of United Parcel gained 1.7% on Monday after UBS raised the stock’s price target to $162 (1.5% upside potential) from $150 on expectations of higher revenues in the fourth quarter due to increased pricing.

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UBS analyst Thomas Wadewitz maintained a Hold rating on United Parcel (UPS). In a research note to investors, he said that “The company’s new peak season surcharges on its Domestic Package residential services could add $550M-$620M in Q4 revenue and highlight a favorable pricing environment.”

United Parcel said last Friday that it will apply new surcharges on parcels during this year’s holiday season. The courier giant plans to apply a surcharge of $4 per package for shippers that sent over 25,000 parcels per week. It will impose a $1 charge on a package for ground deliveries in case of volumes increases by 10% from the February level.

An unprecedented surge in residential delivery volumes amid the COVID-19 pandemic has provided United Parcel leverage to apply surcharges. However, domestic deliveries are more costly than those to businesses. Therefore, surcharges are expected to mitigate the impact of higher costs.

Overall, UPS has a Hold analyst consensus. The average price target of $130.23 implies downside potential of 18.4% to current levels. (See UPS stock analysis on TipRanks).