Raymond James Reiterates Strong Buy Rating on UPS (UPS)

Raymond James analyst Patrick Tyler Brown reiterated a Strong Buy rating and $127.00 price target on UPS (NYSE: UPS).

The analyst comments "Guide reiterated, but shape of earnings pushes more profits into 2H: While management did open up our conversation with reiterating their 2026 guide ($89.7B in revenue at 9.6% adjusted operating margin), there was some shifting over the shape of earnings. To this point, UPS gave more granular details compared to their 4Q call (see here) with 1H26 expected to see revenues flat y/y at ~7.5% adjusted margins (vs. Street/RJe at 7.9%/8.0%) vs. 2H26 at low-single-digit y/y growth at ~11.5% operating margins (vs. Street/RJe both at 11.1%). Further, they broke out 1Q vs. 2Q expectations (first time giving 2Q expectations), showcasing a ramp in profitability from 1Q to 2Q across operating segments with consolidated margins improving over 300 bp sequentially. More near term on 1Q, the guide suggests $1.29B of adjusted EBIT (~$0.99 in EPS) vs. Street/RJe at $1.43/1.41B (Street/RJe at $1.14/1.09 in EPS). Management reiterated 1H26 drags (Amazon glide down, Ground Saver/USPS re-balancing, and international trade volatility) and emphasized that their recently announced Driver Choice Program is a key piece of that cadence, as UPS is offering lump-sum payouts to eligible drivers to accelerate workforce reshaping (has seen good traction in early deployment). ● Amazon glide down and network configuration ongoing: UPS management positioned the Amazon glide down as a deliberate exit from low-value, retailer-controlled last-mile volume that doesn’t require (or pay for) UPS’s integrated network. While they have already removed ~1M pieces per day of Amazon volume in 2025, they are on track for the next ~1M in glide down in 1H26 (about ~$5B of revenue over two years). Management underscored that this volume reduction is the catalyst for the largest network reconfiguration in company history (really haven’t closed facilities before this in the 100+ year history of the company). The reset is not just variable cost flex (removing labor hours), but the company is explicitly taking out semifixed and fixed capacity via the closure of facilities (24 announced for 1H26 with more under review) and shifting more of their volume to automated facilities (27% better productivity vs. non-automated). Ultimately this will allow the network to operate at higher utilization and better margins on a higher-quality volume base. ● Not all about taking out costs, but also growing in the right verticals: Against that backdrop, UPS stressed this is not a “shrink-to-win” strategy, but that they are intensely focused on growth in areas where UPS believes it has durable differentiation and better margin structure. The company highlighted enterprise B2B, healthcare, and SMB as priority vectors, pointing to its Digital Access Program scaling dramatically over the past several years ($150M in 2019 to $4B in 2025) as evidence it can win digitally enabled SMB volume and improve mix. International was also framed as structurally more SMB and B2B heavy, which UPS views as favorable for yield and profitability over time. As the network is resized, UPS wants to “grow in the right places” with premium service, better customer economics, and tighter fit with its integrated network, using service leadership as the foundation for pricing and mix improvement rather than chasing undisciplined volume."

For an analyst ratings summary and ratings history on UPS click here. For more ratings news on UPS click here.

Shares of UPS closed at $110.50 yesterday.

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