Deutsche Bank initiates UPS at Hold, FedEx at Buy

Investing.com -- Deutsche Bank initiated coverage of the U.S. transportation sector with a selective approach, highlighting heightened risks from trade policies and tariffs.
The bank’s analysts assigned a Buy rating to FedEx (NYSE:FDX) and a Hold rating to UPS in a note Friday, citing diverging near-term financial trajectories for the two parcel delivery giants.
Deutsche Bank is bullish on FedEx, assigning a $337 price target, representing a 36% upside.
Analysts view FedEx’s DRIVE initiative, which targets $6 billion in pretax savings, as a game-changer.
"Management have identified an opportunity to improve earnings by over 100%," Deutsche Bank noted, adding that the company has already proven its ability to boost operating profits in a declining revenue environment—something it has only done once before in its 50-year history.
In fiscal 2024, the company’s operating profits increased by over $870 million, despite a $2.5 billion decline in revenue.
While Deutsche Bank acknowledges UPS’s strong management and long-term strategy, it maintains a Hold rating with a $119 price target, implying just 2% upside.
Analysts praised UPS’s "better, not bigger" approach, which prioritizes revenue quality over scale, but flagged significant risks ahead.
One of the biggest concerns is a sharp reduction in UPS’s Amazon (NASDAQ:AMZN) business, which will see a 50%+ decline.
"We’re concerned about near-/medium-term financial performance in light of a 10 percentage point upcoming reduction of its volume," Deutsche Bank wrote, adding that domestic revenue is expected to decline in fiscal 2025.
The bank notes that historically, when UPS faced a declining domestic revenue environment, its domestic margins have deteriorated by 300 basis points on average.
3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads.Is FDX truely undervalued?With FDX making headlines, investors are asking: Is it truly valued fairly? InvestingPro's advanced AI algorithms have analyzed FDX alongside thousands of other stocks to uncover hidden gems with massive upside. And guess what? FDX wasn't at the top of the list.
Unlock ProPicks AI