Credit Suisse upgrades UPS, gets positive on stock for first time in 5 years

Published Mon, Sep 21 20208:41 AM EDTUpdated Mon, Sep 21 20209:59 AM EDT

Jesse Pound @/in/jesse-pound @jesserpound

(This story is for CNBC Pro subscribers only). Credit Suisse has turned bullish on UPS for the first time in years, saying in a note to clients that parcel carriers now have the upper hand in a booming delivery industry. The pandemic restrictions accelerated the shift to e-commerce, leading to a massive spring and summer for delivery companies. UPS reported growth of nearly 21% in its daily volume for the second quarter. That demand surge puts UPS and rival FedEx in a strong negotiating positions, Credit Suisse said, and the bank upgraded the stock to outperform from neutral. "There is a confluence of events that, at the very least, provide UPS and FDX with a window of opportunity to demand significant rate hikes from customers — specifically the largest shippers that consume the most capacity," the note said. After years of investing heavily in its delivery network, UPS is also in a position to cut costs, the firm said. Credit Suisse also praised new CEO Carol Tome, calling the former Home Depot executive a "proven change agent." With this setup, the company should see strong earnings growth for the next two years, Credit Suisse said. "Based on our assumptions for incremental pricing power and what we believe to be a conservative base case for structural cost reductions, we now see a clear path for meaningful margin improvement at U.S. Domestic, and believe UPS can achieve highteens EPS growth in 2021 and 2022," the note said. Credit Suisse raised its price target on the stock to $192 per share, up from $147, about 20% above where trading closed on Friday. The firm said this was the first time its analysts had been bullish on the stock in five years. The stock has outperformed the broader market this year, rising more than 30%, and it fell less sharply during the sell-off in February and March. Credit Suisse is not the only financial firm growing more confident in the delivery companies. In a note last week, Citi laid out a bull case for FedEx's stock to double over the next three years .

A United Parcel Service worker delivers packages in New York City.

Stephanie Keith | Getty Images

(This story is for CNBC Pro subscribers only).

Credit Suisse has turned bullish on UPS for the first time in years, saying in a note to clients that parcel carriers now have the upper hand in a booming delivery industry.

The pandemic restrictions accelerated the shift to e-commerce, leading to a massive spring and summer for delivery companies. UPS reported growth of nearly 21% in its daily volume for the second quarter. That demand surge puts UPS and rival FedEx in a strong negotiating positions, Credit Suisse said, and the bank upgraded the stock to outperform from neutral.