Shares of United Parcel Service Inc (NYSE: UPS) are down nearly 20% from their high in early February, and the future doesn’t look too bright for the shipping company either, as per Bank of America Securities.
Ken Hoexter downgraded UPS
The senior transportation analyst of the investment bank, Ken Hoexter, downgraded UPS on Friday citing several concerns, including valuation. On CNBC’s “Power Lunch”, he said:
FedEx was not part of our downgrade because it’s multiple is quite low. UPS is trading at a six to seven point spread over it. So, we were looking for things that were a little extended right now.
The American multinational is expected to report its quarterly results in the final week of April. Just days ago, it doubled down on its 2019 deal with Google Cloud.
UPS faces a demand issue
United Parcel Service benefitted greatly during the course of the pandemic as demand surged sharply – a tailwind that is now starting to wane, says Hoexter. He noted:
This to us looked more of a demand issue. We do a bi-weekly truck shipper survey and it looks like the demand indicator has taken a consistent step down. And now, it’s taking a faster step down.
As of Monday, UPS customers will have to pay a 16.75% fuel surcharge for U.S. ground delivery services versus 15.25% in the week that just ended.
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Source: https://invezz.com/news/2022/04/10/bofa-securities-just-downgraded-this-transportation-stock/