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United Parcel Eyes Holiday Season for Growth amid Risks

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On Nov 16, we issued an updated research report on United Parcel Service, Inc.UPS .

United Parcel posted positive earnings surprises in the last three quarters, with the average being 2.84%. Also, the company reported mixed numbers in the third quarter of 2015 wherein the bottom line outpaced the Zacks Consensus Estimate while the bottom line missed the same.

United Parcel expects to deliver more than 630 million packages - a 10% year-over-year increase - during the Black Friday-to-Christmas Eve period. Meanwhile, the company has bought Coyote Logistics for $1.8 billion and has also struck a 10-year deal with Cargojet Inc. Such acquisitions and service agreements are likely to improve the company's service efficiency apart from boosting its top line.

Moreover, such investments will lend the company an edge over FedEx Corporation FDX which also expects to record strong business in the upcoming holiday season.

However, increased demand during the holiday rush usually lead to disruption of services, as was the case last Christmas. Thus, to improve its efficiency, the company continues to invest in additional areas which will likely to impact its margins and cash flow.

Further, the company derives a significant portion of its revenues from international operations, including business in emerging markets. Emerging markets are more volatile than developed ones, and any broad-based downturn in these markets may dent the company's revenues and also adversely affect its financial position. Additionally, the company faces significant market risks arising from fluctuations in foreign exchange rates, commodity prices as well as interest rates.

United Parcel currently carries a Zacks Rank #3 (Hold). A couple of better-ranked stocks in the same industry are Hawaiian Holdings, Inc. HA and SkyWest Inc. SKYW . Both the companies sport a Zacks Rank #1 (Strong Buy).

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

UTD PARCEL SRVC (UPS): Free Stock Analysis Report

FEDEX CORP (FDX): Free Stock Analysis Report

HAWAIIAN HLDGS (HA): Free Stock Analysis Report

SKYWEST INC (SKYW): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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