UBS upgrades investor rating of UPS, downgrades FedEx

Investment bank and financial services firm UBS has upgraded its rating of UPS stock to “buy” while downgrading FedEx stock to “neutral”, after evaluating the near-term outlook of both companies.

FedEx earned the downgrade for its vulnerability to tariffs and slower trade activity due to trade war uncertainties, as about 55% of its revenue comes from its global FedEx Express business. UBS also said it did not expect to see the benefits from the company’s 2016 acquisition of TNT Express for some time yet.

By contrast, UPS has “multiple ways to win”, according to the firm. UBS cited the possibility of improved margins in UPS’ domestic package service and stronger operating income growth, thanks to a “transformation” plan aimed at reducing operational costs and refocusing on parcel delivery that, due to e-commerce growth, now skews towards consumers rather than businesses.

The company’s new agreement with Teamsters, yet to be ratified for both UPS and UPS Freight, may also set the company up for new growth possibilities.

UBS noted the risk from Amazon, which looks to be launching its own logistics network, but described this as “a long term factor”.

(Source: CNBC)