Investing.com -- Wells Fargo downgraded United Parcel Service (NYSE:UPS) stock to Equal Weight from Overweight and cut its price target to $98 in a note Tuesday, citing mounting trade headwinds and execution risks across the parcel delivery industry.

Wells Fargo stated, “We see elevated risk to volume from tariffs and the elimination of the de minimis exemption.” 

The firm also warned that both UPS and FedEx (NYSE:FDX) face network execution challenges as they adapt to shifting trade and e-commerce dynamics.

Wells Fargo expressed concern over the near-term outlook for UPS, noting that “Domestic volume softened in 1Q and we worry about a further softening post the de minimis roll back in May.” 

The bank believes that while UPS’s strategy is fundamentally sound, “execution gets harder with a less favorable macro backdrop.”

Parcel industry estimates were revised lower for both FedEx and UPS due to expected volume declines in both domestic and international segments. 

Analysts highlighted that elevated Chinese tariffs and the elimination of the de minimis exemption is likely to weigh on US volume, particularly for UPS, where the shift may “drive some network de-leveraging which could hurt margins.”

Though direct exposure to China is limited, Wells Fargo noted that “growth of de minimis volume has been notable, equaling ~6% of the US market and ~100% of ex-Amazon growth since 2020.” 

With that growth now under pressure, the firm sees increased risk if Chinese e-commerce players lose share to Amazon (NASDAQ:AMZN).

While both UPS and FedEx are now rated Equal Weight, Wells Fargo expressed a preference for FedEx, citing better positioning and a potential catalyst from its LTL business spin-off. 

The FedEx price target was lowered to $220 based on a “low-end 11x multiple” on 2026 estimates.

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