Leading logistics solutions provider UPS (NYSE:UPS) is grappling with soft demand and increased labor costs. In response to these difficulties, the company is implementing cost-cutting measures, which include extending early retirement offers to certain pilots.
UPS expects about 167 pilots (157 captains and 10 first officers) to accept its voluntary separation offer, including cash and healthcare benefits.
Logistics companies like UPS and FedEx (NYSE:FDX) witnessed solid air cargo demand during the pandemic, leading to significant capacity expansion. However, declining parcel volumes, moderation in freight rates, and overcapacity created due to pandemic-led demand are now weighing on their financials.
Given the weak demand, UPS’ rival FedEx is consolidating its operations. Due to the consolidation of its operations into one unit, FedEx’s pilots fear that the company could axe some of their jobs. While these companies are fighting lower demand and higher costs, the competition in the industry is growing, with Amazon (NASDAQ:AMZN) again reviving its shipping service known as Amazon Shipping.
With this backdrop, let’s look at what the Street recommends for UPS stock.
Is UPS Stock a Buy or Sell?
UPS is focused on high-quality revenues and lowering costs. Nevertheless, lower volumes and higher costs led management to lower its 2023 revenue outlook. For 2023, UPS expects to deliver consolidated revenues of about $93 billion, down from its earlier guidance of $97 billion.
Due to the ongoing softness in average daily volumes, analysts are cautiously optimistic about UPS’ prospects. UPS stock has six Buy, nine Hold, and one Sell recommendations, translating into a Moderate Buy consensus rating. Analysts’ average price target of $185.50 implies 9.33% upside potential from current levels.
