Deutsche Bank Comments on UPS After Second Quarter Results

Deutsche Bank has published a report on United Parcel Service UPS commenting on the shipper's strategy. In the report, Deutsche Bank wrote, "While we were admittedly disappointed with UPS' lackluster H2 outlook, we believed UPS shares were cheap two days ago and were placed in the bargain bin following yesterday's 3.3% sell-off (vs. a 0.4% decline in the S&P 500). With UPS shares trading at 14.9x our NTM EPS estimate of $4.80 (5 months of 2011 and 7 months of 2012), or an 18% discount to its five-year NTM P/E multiple, we do not believe UPS's network franchise, free cash generation, and earnings growth potential are fairly valued by the market. In fact, UPS shares are trading at a ~7% 2011 free cash yield on our estimates, and is trading at only 16.7x the midpoint of its reiterated 2011 guidance of $4.15-4.40." Deutsche Bank noted that they thought UPS had been excessively conservative in their decision making over the last quarter. Deutsche Bank rated UPS a BUY with a price target of $93.00. United Parcel Service closed Tuesday at $71.59.