BMO says buy UPS shares on its rising profitability

United Parcel Service (UPS) driver pushes a dolly of packages towards a delivery van on a street in New York.
Victor J. Blue | Bloomberg | Getty Images

United Parcel Service shares will rally as the delivery company becomes more operationally efficient, according to BMO Capital Markets.

The firm raised its rating to outperform from market perform for UPS shares, predicting rising profitability from its U.S. business.

"We believe that U.S. Domestic operating margins have bottomed and should gradually recover over the coming quarters as the benefits from network automation, Transformation initiatives, and revenue quality improvement efforts begin to gradually outweigh the operational penalties the company is incurring to implement these initiatives," analyst Fadi Chamoun said in a note to clients entitled "U.S. Domestic Margins on Improving Trend" Sunday.

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