BMO Capital Markets said United Parcel Service could benefit from lower interest rates as inflation eases. Analyst Fadi Chamoun upgraded his rating on the stock to outperform from market perform. He did lower his price target to $150 from $155, but the new forecast still implies an upside of nearly 17% from Monday’s closing price. “After nearly two years of weak B2B demand conditions, we expect lower interest rates and a potentially recovering industrial economy to support a return to low single-digit growth in B2B transaction volumes,” Chamoun said in a report. The Fed expects this year Rate cuts began earlier. With inflation approaching the Fed’s 2% target, the Fed is expected to cut interest rates again by 0.25 percentage points next week. UPS YTD Mountain UPS Inflationary pressures on UPS unit costs in 2024 are also easing, Chamoun said. The company has a series of productivity initiatives, such as Future Networks, which alone are expected to save $3 billion in costs by 2028. Reinvest in more services, such as healthcare logistics. Analysts pointed out that this is one of the company’s higher value-added logistics services. Chamoun said the stock trades cheap compared with historical levels. “UPS valuations are near historic lows, which we believe provides positive upside given the expected free cash flow to EBITDA conversion rate of approximately 40% (in line with the historical 10-year average, which is one of the highest in the industry). risk/reward, the stock fell 18.3%.
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