UPS Stock Gets Downgraded Despite Solid FedEx Earnings. What’s Bugging the Analyst.

Investors aren’t feeling great about the outlook for shipping. Coming into Friday trading, UPS shares were down about 33% year to date. (Photo by Justin Sullivan/Getty Images)

Key Points

About This Summary

• BMO Capital Markets analyst Fadi Chamoun cut his rating on United Parcel Service to Hold from Buy, lowering the price target to $96.
• Chamoun’s downgrade was influenced by the lack of demand recovery in the business-to-business segment.
• UPS and FedEx shares trade at a discount to the S&P 500, but analysts are concerned about trade policy and downgrades.

United Parcel Service stock caught a downgrade Friday despite a relatively strong earnings report from FedEx on Thursday evening.

BMO analyst Fadi Chamoun cut his rating on UPS shares to Hold from Buy. His price target went to $96 from $125. Chamoun isn’t seeing a demand recovery in the “important” business-to-business segment.

UPS shares traded as high as $85.61, but closed at $84.06, down 1.2% on the day, while the S&P 500 and Dow Jones Industrial Average gained 0.5% and 0.4%, respectively.

The initial rise, despite the ratings cut, is probably due to FedEx. Its shares rose 2.3% on Friday after the company reported better-than-expected fiscal first-quarter earnings on Thursday evening.

FedEx’s adjusted earnings per share landed at $3.83 from sales of $22.2 billion on Thursday. Wall Street was looking for EPS of $3.63 from sales of $21.7 billion, according to FactSet. For the full year, FedEx expects 4% to 6% revenue growth, better than the 1% growth Wall Street was projecting.

JPMorgan analyst Brian Ossenbeck called the quarter “solid” in a report after earnings. He rates shares Buy, but lowered his price target by $1 to $284. Ossenbeck took a “negative view on FedEx into the earnings release,” for many of the same reasons Chamoun downgraded UPS shares, including stagnant business-to-business demand.

Trade policy has also been a problem for both companies. A recent executive order from President Donald Trump ended the tariff-free treatment of “de minimis” 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.

That raises costs for consumers and pressures volumes for shippers. FedEx’s international volumes fell 3% year over year in the quarter just reported.

Wall Street isn’t feeling great about either stock lately. UPS shares have been downgraded four times in the past three months. FedEx shares have been downgraded twice.

Overall, 48% of analysts covering UPS stock rate shares Buy, according to FactSet, down from about 58% at the start of 2025. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target for UPS stock is about $102, down from about $150 at the start of the year.

The Buy-ratio for FedEx stock is about 58%, essentially unchanged from the start of 2025. The average analyst target price, however, has slipped. It’s currently about $265 a share, down from $327 at the end of 2024.

Investors haven’t been feeling much better than analysts. Coming into Friday trading, FedEx stock was down about 19% year to date. UPS stock was off about 33%.

Eventually, sentiment will get bad enough that both stocks are good value. UPS and FedEx shares trade for about 12 times estimated earnings expected over the coming 12 months, a steep discount to the S&P’s 23 times multiple.

Wall Street doesn’t think that time is now, though.

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