The stock of United Parcel Service (UPS) has been downgraded amid signs that the U.S. economy is slowing.
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Fadi Chamoun, a top five-star rated analyst at BMO Capital Markets, lowered his rating on UPS stock to Hold from Buy, and dropped his price target on the shares to $96 from $125. The downgrade comes a day after UPS rival FedEx (FDX) delivered strong financial results for this year’s second quarter.
Chamoun’s main reason for downgrading UPS stock is that he isn’t seeing a demand recovery in the company’s business-to-business segment, a situation that is likely to be exacerbated if the U.S. economy continues to cool or enters a recession.
Trade Policies
U.S. trade policies also continue to be a problem for shipping and logistics companies such as UPS and FedEx. A recent executive order from U.S. President Donald Trump ended the tariff-free treatment of “de minimis” parcels, which are small, low-value packages that could previously enter America without taxes or duties being applied to them.
The fact that small packages are no longer exempt from import duties raises costs for consumers and pressures volumes for shippers such as UPS, notes Chamoun in a note to clients. The lower rating on UPS stock by BMO Capital Markets is the fourth time the company has been downgraded in the past three months. Analysts have concluded that UPS is too tied to the economic cycle and trade policies in the U.S.
Is UPS Stock a Buy?
The stock of UPS has a consensus Moderate Buy rating among 19 Wall Street analysts. That rating is based on eight Buy, eight Hold, and three Sell recommendations issued in the last three months. The average UPS price target of $103.74 implies 21.25% upside from current levels.
