UPS stock price target lowered to $110 by UBS on volume declines

UBS lowered its price target for UPS to $110 from $118, while maintaining a Buy rating, anticipating Q3 2025 EPS of $1.36, slightly above consensus. This projection is supported by a forecast 7.4% increase in domestic revenue per unit and aggressive cost-cutting, including facility closures, which are expected to partially offset an anticipated 13.4% year-over-year decline in domestic volumes. Despite the stock trading near its 52-week low and offering a substantial 7.67% dividend yield, the market outlook remains mixed, with some analysts expressing caution regarding demand recovery.

Analysis

United Parcel Service (UPS) is navigating a challenging market characterized by declining volumes, offset by aggressive cost management and pricing power. While trading near its 52-week low, analyst views are mixed; UBS recently reduced its price target to $110 from $118 but maintained a 'Buy' rating, projecting Q3 EPS of $1.36, which is slightly above the $1.33 consensus. This optimism is founded on a modeled 7.4% year-over-year increase in domestic revenue per unit, which is expected to cushion the impact of a steep 13.4% drop in domestic volumes. The company's cost-cutting is substantial, with 10-15 facilities removed in Q3 following 74 closures in the first half of 2025. However, this bullish outlook is tempered by BMO Capital's recent downgrade to 'Market Perform' due to an 'elusive' demand recovery, particularly in the business-to-business segment. The situation is further complicated by a recent Q2 earnings miss and the termination of the planned Estafeta acquisition. Despite these headwinds, the stock offers a substantial 7.67% dividend yield, presenting a value and income proposition.

Key Decisions for Investors

• For income-oriented portfolios, the significant 7.67% dividend yield offers a compelling return, though investors must tolerate the risk associated with declining shipping volumes and a stock price near its 52-week low.
• Investors should closely scrutinize the upcoming Q3 earnings report on October 28, 2025, for evidence that pricing power and cost-cutting are effectively offsetting the projected 13.4% volume decline, as this is the central pillar of the current bull thesis.
• Given the split analyst sentiment, with 'Buy' ratings from UBS and Stifel contrasting with BMO's downgrade citing weak demand, it is prudent to weigh the company's internal efficiency gains against the broader macroeconomic uncertainty before initiating or increasing a position.