In a report released yesterday, Ken Hoexter from Bank of America Securities reiterated a Hold rating on United Parcel, with a price target of $105.00.
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Ken Hoexter has given his Hold rating due to a combination of factors related to UPS’s constrained cost-cutting flexibility and valuation. The company’s agreement with the Teamsters to cap its Driver Choice Program at 7,500 employees, below the original 10,000 goal, reduces the scale of planned buyouts and may hinder progress toward its 30,000 headcount reduction and $3.0 billion cost savings plan.
In addition, UPS agreed not to introduce further severance programs during the life of the current union contract, forcing a greater reliance on attrition and layoffs to achieve margin improvement. Given these labor constraints and a more challenging path to earnings growth, Hoexter trimmed his price objective to $105, based on a lower earnings multiple, and maintained a Neutral stance, seeing limited upside from the current share price relative to the risks.
UPS’s price has also changed moderately for the past six months – from $86.620 to $97.160, which is a 12.17% increase.