3 analysts have lowered their price targets for UPS. Why Buy?

This week.United Hearts Parcel Service (NYSE: UPS)In addition to delivering packages to customers' doorsteps, Bria also released a business update, including financial goals for the next three years. However, investors didn't buy the news. Since the update, UPS shares have fallen more than 8% from the previous day's closing price, and Wall Street isn't convinced either. In fact, three analysts lowered their price targets for UPS stock on Thursday.

But just because analysts are bearish on UPS doesn't mean forward-thinking investors should be. In fact, for patient investors, now is a great time to buy shares of this logistics leader.

Bearish Rationale for Grand Blanc

Of the three analysts who lowered their price targets, Helane Becker was the most skeptical. Becker, an analyst at TD Cowen, lowered his price target from $147 to $140. Based on the $147.30 closing price of UPS stock, Becker's price target implies a downside of about 5%. According to Thefly.com, Becker is basing its price target on what the company believes will be its 2026 free cash flow ($17 billion to $18 billion), notwithstanding its projected revenue of $108 billion to $114 billion.

HSBC(math.) andStiefel banks(StifelAnalysts who see little upside for UPS have also lowered their price targets. HSBC analyst Parash Jain, for example, cut his price target to $150 from $155 because he thinks UPS will have to make acquisitions to help meet its revenue forecasts - something that will affect the company's dividend. On the other hand, J. Bruce Chan still sees room for UPS shares to rise. Chan lowered his price target to $170 from $178, citing upside of about 15% from Wednesday's closing price. In response to the 2026 financial targets shared by UPS, Chan told investors that the company's outlook is "likely to be more optimistic, especially after weaker demand and labor challenges in 2023," according to a report on Thefly.com.

UPS Is a Great Dividend Stock Despite a Bleak Outlook

It may be disconcerting to see three analysts lower their target price for UPS, but investors must remember that analysts tend to have a short-term investment horizon. With that in mind, investors can be cautious about analyst price targets. Instead, it's best to focus on the merits of UPS stock as a dividend play. If the company goes ahead with its plan to return $6.52 per share to investors in the form of a dividend in 2024, that would mean that UPS's dividend compound annual growth rate from 2010 to 2024 would be 9.3%. And the company hasn't sacrificed its financial position to appease shareholders. Over the past 10 years, UPS has averaged a dividend payout ratio of 84%.

UPS and its forward dividend yield of 4.4%, thanks to management's unwavering commitment to dividend increases over the past 14 years, is a worthwhile investment to consider beforehand for investors willing to swim against the tide of pre-market pessimism. The company is the market leader where it counts, and its strong free cash flow target of approximately $17.5 billion in 2026 bodes well for its ability to continue to raise the dividend for the foreseeable future.

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HSBC Holdings is an advertising郃 partner of The Ascent, a division of The Motley Fool.Scott Levine does not hold any of the above shares.The Motley Fool recommends HSBC Holdings and the United Carrier Parcel Service.The Motley Fool has a disclosure policy.

3 analysts have lowered their target prices for UPS shares. Here's why to buy. Originally published in The Motley Fool.