UPS climbs most since 2022 as cost cuts spur UBS upgrade

United Parcel Service Inc. rose the most in more than a year after UBS Group AG upgraded the courier to buy, predicting the company will continue to rein in expenses following its elimination of 12,000 management jobs.

Analyst Thomas Wadewitz anticipates UPS’ March 26 investor day will shed light on its plans to support margin expansion and earnings growth even amid muted revenue trends. UPS jumped 4.9% on Tuesday in the biggest one-day gain since November 2022, adding more than $5 billion to its market value.

“We expect UPS to lay out two large levers for cost reduction including automation in buildings and rationalization of facilities that combined could support over $2 billion of annual cost savings over the next several years,” he wrote in a note to clients on Tuesday. 

After a disappointing earnings report last week, UPS said it would save more than $1 billion by cutting 12,000 of its 85,000 management jobs. Wadewitz also sees potential for UPS to reduce headcount by 20,000 in its sorting and delivery stations through technologies like robotics, which he estimates would save the company roughly $1.1 billion.

He expects the cost savings to spur improved margin performance for its domestic package business this year and strong EPS growth in 2025 and 2026. Wadewitz notes UPS is also starting to win back some of the market share it lost to FedEx Corp. in 2023.

Despite Tuesday’s jump, UPS has trailed the S&P 500 Industrials Index this year, due partly to its weaker-than-expected fourth-quarter update. The average price target of $162 among analysts tracked by Bloomberg implies roughly 11% return potential over the next 12 months.