United Parcel Service Inc. could offer an alternative for shippers impacted by the Houthi attacks on cargo ships in the Red Sea, according to T.D. Cowen analyst Helane Becker.
“We expect they will offer a good value proposition to shippers who may be experiencing delays due to the continued Houthi attacks in the Red Sea,” she wrote, in a note released Thursday. “UPS can offer some shippers solutions from Asia, but, pragmatically, 80% of all goods go via ocean, and most of that is low value stuff or things that cannot go via air.”
“These are bulky items with no easy substitute such as automobiles, furniture, steel, timber, and cement,” Becker added. “UPS can help in the cold chain supply chain, which could be a short term opportunity to raise revenue.”
Related: Fallout from Red Sea attacks could boost this sector’s margins, says T.D. Cowen
The cold chain supply chain refers to the storage and transport of refrigerated cargo.
T.D. Cowen maintained its market perform rating and $175 price target for UPS
UPS,
which reports fourth-quarter results before market open on Jan. 30. Analysts surveyed by FactSet expect sales of $25.4 billion and earnings of $2.46 a share.
Of 33 analysts surveyed by FactSet, 14 have an overweight or buy rating, 17 have a hold rating, and two have a sell rating for UPS.
Related: Retailers could suffer ‘perfect storm’ of Red Sea and Panama Canal disruption, says logistics expert
UPS shares have fallen 12.3% in the last 52 weeks, compared with the S&P 500 index’s
SPX
gain of 20.6%.
Houthi rebels, who control much of Yemen, have been targeting cargo ships in the Red Sea in recent months, prompting a U.S.-led coalition to launch air strikes against the group. But attacks on shipping are continuing.
On Monday a U.S. -owned container ship in the Gulf of Aden was struck by an anti-ship ballistic missile fired from Houthi-controlled Yemen. A Greek-owned bulk carrier was struck in the Red Sea Tuesday, the BBC reported, citing the Iran-backed rebel group. The Genco Picardy, a U.S.-owned and operated bulk carrier was hit by a drone Wednesday, according to the U.S. military’s Central Command.
The Red Sea is a critical shipping lane for cargo traveling through the Suez Canal. Approximately 30% of global container traffic traverses the Suez Canal, transporting $1 trillion of goods per annum, the government of New Zealand reported in 2021.
Related: Shipping stocks rise as latest Houthi attack thrusts dry bulk fleet into the spotlight
Some major shipping companies have re-routed their ships to travel around the Cape of Good Hope in South Africa, but that results in a longer voyage. T.D. Cowen estimates that the detour adds eight to 12 days on journeys from the Middle East or Southeast Asia to the Port of Rotterdam in the Netherlands.
This post was originally published on Market Watch
