With strong free cash flow and a healthy dividend yield, valuation was analyst’s only ‘hangup’ on the stock
Shares of United Parcel Service Inc. delivered healthy gains Thursday, after Stifel Nicolaus analyst Bruce Chan said their recent selloff, despite continued strong fundamentals and e-commerce growth, has presented investors with a “good opportunity” to buy.
The package delivery giant’s stock rose 3.7% in morning trading. It has now bounced 6.9% since closing at a 5 1/2-month low $178.42 on Oct. 4, but was still 12.3% below its May 7 record close of $217.50.
Stifel’s Chan raised his rating to buy, just about four months after downgrading to hold, saying “there’s a lot to like about the fundamental UPS story right now.” He boosted his stock price target to $224 from $210.
“Despite tough [year-over-year comparisons], e-commerce continues to drive secular volume growth in the company’s core small package unit, and continued yield management focus is a boon in an environment with ample near-term rate momentum, in our view,” Chan wrote in a research note to clients.