03:30 PM EDT, 03/27/2024 (MT Newswires) -- United Parcel Service's ( UPS ) latest three-year financial targets topped market expectations, though they likely "carry risk" as the company has previously missed its multiyear objectives, BofA Securities said Wednesday.

The package delivery company outlined the targets Tuesday, including eyeing 2026 revenue of about $108 billion to $114 billion and adjusted operating margin above 13%. BofA said it was looking for $105 billion and 12%, respectively. The company's outlook implies earnings of about $13.40 per share, roughly 20% above BofA's estimate, the brokerage said.

"UPS has missed its multiyear targets set at its last few analyst meetings, thus we expect its outlook to carry risk," BofA analyst Ken Hoexter said in a note. The company's revenue is expected to increase at a mid-single digit rate, which Hoexter said was above the industry growth rate of 2.6%, excluding Amazon.com ( AMZN ) . "This appears to be an aggressive return-to-growth outlook, despite sustained weakness in the small package market."

The company's officials said on a Tuesday call with analysts that the industry has nearly 12 million average daily volume of excess capacity, roughly 50% of which is at the United States Postal Service, according to a Capital IQ transcript.

UPS is taking measures to slash costs through its Network of the Future initiative by further automating its facilities and bringing robotics into its small package operations in "a big way," Chief Financial Officer Brian Newman told analysts.

"This will enable us to reduce our reliance on labor and drive the productivity flywheel, which should translate into about $3 billion in savings over five years, with half of that by 2026," Newman said. The company is reducing 12,000 management positions this year under its Fit to Serve initiative, he added.

UPS shares fell 8.2% Tuesday, the steepest decline on the S&P 500. The stock was up 2% in Wednesday late-afternoon trade.

"While its outlook set a good stage, the wind was taken out given the near-term EBIT shortfall, the need for a macro rebound to hit targets, and significant excess supply," BofA's Hoexter said.

BofA cut its price objective on the UPS stock to $158 from $164 while maintaining its neutral rating.

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