On Feb 26, 2014, we issued anupdated research report on
United Parcel Service, Inc.
). While the company's top line missed the Zacks Consensus
Estimate, the bottom line was in line with our expectation.
UPS delivered positive to neutral earnings surprise in the
last four quarters, with an average surprise of 2.97%. Currently,
the Zacks Consensus Estimate for the first quarter earnings is
pegged at $1.12 per share, representing a 7.63% annualized
For 2014, UPS expects earnings per share to range from $5.05
to $5.30, up 11% to 16% over 2013 buoyed by gradually recovering
economy as the U.S. GDP is expected to grow 2.7%.
Eurozone GDP is expected to grow 1.2% from 2013. In addition,
the Asian economy is expected to exhibit solid growth with China
likely to grow 7.5%. In addition, global exports are projected to
slightly outpace global GDP, which is also likely to benefit
Going forward, UPS is also banking upon recent developments in
WTO Trade Facilitation Agreement, which seeks to simplify global
We believe the company's optimism underpins its strength with
respect to its market position that rivals the likes of
Radiant Logistics, Inc
), and its ability to safeguard shareholders' value despite
unfavorable market dynamics. The company's financial strength
drives growth through planned investments, technology-backed
operations and enhanced worldwide network.
However, we keep in mind the company's cautious outlook for
the first quarter results. UPS expects earnings per share growth
of below 10%, due to the higher tax rate and disruption in supply
chain and freight segment due to weakness in freight forwarding
business. The company expects tax rate to increase year over year
to 36% in 2014.
In addition, the company expects International revenue to
improve at slower pace in 2014 as non-premium export products
continue to offset growth. Supply Chain and Freight segment
revenues and profits are also expected to be flat year over year
in 2014 due to impediments in the international airfreight
Growth in domestic package is expected to be offset by higher
health care costs. In addition, investment in network improvement
will result in cost escalation of over $100 million in 2014.
Currently, UPS has a Zacks Rank #4 (Sell).
Stocks That Warrant a Look
Better-ranked stocks in this sector include Zacks Rank #1
Avianca Holdings S.A.
AVIANCA HOLDNGS (AVH): Free Stock Analysis
FEDEX CORP (FDX): Free Stock Analysis Report
RADIANT LOGIST (RLGT): Free Stock Analysis
UTD PARCEL SRVC (UPS): Free Stock Analysis
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