Trump’s Tariffs Help Trigger a Downgrade of FedEx and UPS Stocks. Why Shares Are Rising.

FedEx and UPS stocks were moving up after a BofA Securities downgrade. (CHARLY TRIBALLEAU/AFP via Getty Images)

Key Points

About This Summary

• BofA Securities analyst Ken Hoexter downgraded FedEx to Hold and UPS to Sell, citing volume and cost pressures.
• The analyst expects a muted air peak season in 2025, partly due to the end of tariff-free treatment of small parcels.
• Despite the downgrades, FedEx and UPS stocks showed resilience, with FedEx up 1.9% and UPS up 0.3% in early trading.

The logistics business has been tough lately. One analyst doesn’t see it getting better soon, leading him to downgrade shares of both FedEx and United Parcel Service .

Thursday, BofA Securities analyst Ken Hoexter cut his rating on both FedEx and UPS. His FedEx rating went to Hold from Buy, while he cut his call on UPS to Sell from Hold. Hoexter’s price target for FedEx stock is now $240, down from $245, while he lowered his UPS target to $83 from $91.

He sees “increased near-term pressure on volumes and costs” and expects “a muted 2025 air peak season.” Part of the problem is President Donald Trump’s executive order that ends the tariff-free treatment of “de minimus” parcels—small, low-value packages that companies such as Temu and Shein had been able to ship from China to the U.S. without paying taxes and duties on them.

Putting import levies on those products will result in lower demand, Hoexter said in a research report. “The De minimis impact is De majoris,” he wrote.

That creates another headwind for FedEx and UPS, who have been fighting through lower volumes since Covid-induced peaks. Still, FedEx stock rallied, closing up 1.4% at $228.81 after opening in the red, while the S&P 500 and Dow Jones Industrial Average gained 0.9% and 1.4%, respectively. UPS shares rose 0.9%, closing at $84.65.

The stocks’ starting points help explain the muted reaction to the downgrades. FedEx stock was down about 20% year to date. UPS shares were off 33%.

Declines have left both stocks trading for about 12 times estimated earnings over the coming 12 months, a discount to the S&P 500’s 23 times. Five years ago, both UPS and FedEx shares traded for closer to 20 times estimated earnings.

Overall, 63% of analysts covering FedEx stock rate shares Buy, according to FactSet. About 47% of analysts covering UPS stock rate shares Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 55%.

The average analyst price target for FedEx stock is about $367 a share. The number for UPS about $143.

Write to Al Root at allen.root@dowjones.com