Citigroup Lowers Price Target for UPS Amid Amazon Changes

Citigroup recently reduced its price target for United Parcel Service (UPS) stock while maintaining a buy rating. Despite a lower target, the report suggests this may present a buying opportunity as UPS restructures its operations following a significant reduction in Amazon deliveries.

Date: 08-02-2025

AI Rating: 5

Impact on Revenue Growth: The report indicates that United Parcel Service's (UPS) revenue will likely be negatively impacted due to the agreement with Amazon to substantially cut deliveries. The guidance for 2025 revenue is set at $89 billion, lower than the $91.1 billion expected for 2024. This reduction could lead to short-term challenges for the company.

Profit Margins: Although there is a reduction in revenue, the report suggests that operating profit can increase by about 8% due to anticipated margin expansion. The shift from low-margin deliveries from Amazon to higher-margin deliveries in sectors like healthcare could enhance profitability over time.

Execution Risk: The market is concerned about the execution risks following UPS's substantial change in delivery operations. The successful restructuring to substitute lost volumes from Amazon with other profitable sources will be critical for maintaining and improving margins.

Summary: Overall, while the price target has decreased, the anticipated margin expansion due to a strategic shift may create a buying opportunity for investors. UPS's focus on high-margin deliveries aligns with its 'better not bigger' framework, positioning it favorably for growth despite immediate revenue reductions from its largest customer.

Stocks: UPS AMZN