March is turning out to be a miserable month to own UPS (UPS 5.93%) stock.
Shares of the package transportation giant declined each trading day so far this month -- and even longer. Stretching back into February, UPS is down five trading days in a row, including Thursday's 6.2% drop through 2:40 p.m. ET.
But don't blame Raymond James. This Wall Street analyst is doing its best to buck up UPS's stock price.
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RJ hearts UPS
Reiterating his $127 price target on UPS today, reports StreetInsider.com, Raymond James analyst Patrick Tyler Brown argues UPS is a "buy" despite warning investors it will experience zero revenue growth -- and worse profit margins than feared -- in H1.
Growth may not happen in H1, says Brown. But H2 should see "low-single-digit y/y growth" and substantially higher operating margins of 11.5% as the company recovers from its "deliberate exit from low-value, retailer-controlled last-mile volume" work for customers such as Amazon.com, and replaces this revenue with more profitable work. At the same time, UPS is reconfiguring its network to, among other things, favor use of automated facilities that offer "27% better productivity vs. non-automated."
Ultimately, the analyst sees UPS emerging from this realignment, focusing its business on providing "premium service" and enjoying "better customer economics," leading to renewed sales growth and better profits.
NYSE: UPS
Key Data Points
Is UPS stock a buy?
And Raymond James may be right about that. With its stock price down 8% over the past year, UPS stock isn't much to look at right now. But the shares sell for under 17 times earnings, pay a dividend yield of nearly 6%, and are expected to grow earnings at 9% over the next five years.
With numbers this cheap, it won't take much improvement to turn around UPS -- and turn UPS stock into a buy.
