Yahoo Finance Live anchors discuss Deutsche Bank’s Buy rating on UPS.
BRIAN SOZZI: I'm watching UPS this morning following upgrade from Deutsche Bank, as they now view the stock as a buy. They also raised the price target on the stock to $220 from $197.
Guys, a really a two part note here by Amit Mehrotra over at Deutsche Bank. One, he says the near-term investors are perhaps too focused on any potential volume, misses, because of the economic slowdown. And then, two, longer term, he likes what the company is doing operationally under CEO Carol Tomé, just operating a more efficient business.
BRAD SMITH: Yeah, they said the bottom line here is that UPS shares, it appears to them, as overindexing transitory headwinds, they are calling-- rather than or saying against some of the structural opportunity for consistent profitable growth. And so what we've seen is kind of a divergence now between how the Street is looking at a FedEx versus a UPS. And for UPS, being able to even in the current environment right now, as this buy thesis has stated.
Even within this environment, stewarding the necessary kind of changes right now to make sure that they are not only delivering at a time where they know that some of the volumes could fluctuate here. Not just among the end consumers who are trying to figure out, OK, do we have the ability to spend the same level that we did midpandemic?
And for FedEx, for UPS, that's where kind of that divergence takes place. And it really also comes down to how many end businesses that you're gonna continue to engage with. And for a lot of those businesses, they've just passed that cost through to consumers as well.
BRIAN SOZZI: Yeah, one minor red flag I will note here, UPS has a key labor union contract up for renewal next year, covering a large part of employees. If I have it right, UPS has not seen a strike in over 25 years so that is something to watch out for.
Now, people familiar with the matter have told me, that they expect to get this deal done and relatively quickly. But again, something to watch going forward.
JULIE HYMAN: Yeah, I mean Mehrotra doesn't seem concerned about the strike. He thinks it will be more benign than expected. I mean, you have a lot of contrarian calls. This is quite a contrarian call, right? And it's kind of interesting how he looks at the history and says that the other times when it was at these levels, it was is when it ended up doing well.
BRIAN SOZZI: Big difference--
JULIE HYMAN: So we'll see.
BRIAN SOZZI: --versus FedEx. I mean, the sentiment on UPS versus FedEx headed into next year couldn't be more different.
BRAD SMITH: Yeah,
JULIE HYMAN: Well, in theory, that's when it's time to buy, is what he's arguing. So we'll see if he's right.