UPS positioned for growth amid e-commerce expansion, freight recovery

Investing.com -- United Parcel Service Inc (NYSE: UPS) stock's valuation is at the lower end of its historical forward price-to-earnings range giving an attractive buying opportunity, Citi said. Brokerage has a “buy” rating on stock.

Citi's $158 price target for UPS reflects 18 times of its 2025 EPS estimate. The brokerage sees further upside from UPS's $3 billion cost-saving program, and its strategy aimed at enhancing revenue quality and density.

Despite competitive pressures from Amazon (NASDAQ: AMZN) Logistics, Walmart (NYSE: WMT) Fulfillment Services, and direct-from-China e-tailers like Temu, UPS is poised to capitalize on the recovery in freight demand and e-commerce growth, the note highlighted.

Citi pointed to UPS's expanding footprint in business-to-business, small-to-medium businesses, and healthcare logistics, bolstering pricing power.

A key catalyst for growth is the company's recent contract win with the United States Postal Service, which Citi expects to drive operating income gains with minimal infrastructure investment.

Additionally, Citi expects margins to benefit from lapping significant wage increases beginning in the third quarter of 2024.

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