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United Parcel Service (UPS) Q4 Earnings: What's in Store?

United Parcel ServiceUPS is scheduled to report fourth-quarter 2017 results on Feb 1, before the market opens.

Last quarter, the company posted earnings of f $1.45 that surpassed the Zacks Consensus Estimate of $1.44 per share. The bottom line also inched up 0.7% on a year-over-year basis. However, results were hurt by the hurricanes.

Revenues improved 7% to $15,978 million from the year-ago quarter, beating the Zacks Consensus Estimate of $15,605.5 million. The upside was driven by growth across all the key segments of the company.

Things seem to be looking up for the company ahead of the fourth-quarter earnings release as well. The bullishness can be gauged from the fact that the UPS stock has outperformed its industry over the last month. Shares of the company have gained 11.4% compared with the industry's 9.9% rally in the period.

Factors Likely to Influence Q4 Results

E-commerce growth is likely to aid the company's results in the soon to-be-reported quarter. Revenues from the company's U.S. Domestic Package unit are also likely to benefit from increased package volumes on the back of e-commerce growth. Ground products are likely to drive growth in the segment. In fact, UPS like its rival FedEx FDX had a highly successful holiday season buoyed by strong e-commerce growth, per a Reuters report. To meet the surge in demand during the holiday season, UPS hired around 95,000 seasonal workers.

At the U.S. domestic package division, the Zacks Consensus Estimate for fourth-quarter revenues is pegged at $11,578 million, higher than $9,649 million reported in the previous quarter. The projection justifies our bullish stance on the segment.

Furthermore, the company's international package division is to perform well in the fourth quarter on the back of robust growth in export volumes. At this segment, the Zacks Consensus Estimate for fourth-quarter revenues is pegged at $3,607 million, lower than the $3,364 million in the third quarter of 2017.

However, we expect the company's bottom line to be hurt by escalated costs in the to-be-reported quarter. In fact, high package delivery costs have been hurting UPS for some time and the fourth quarter is likely to be no different. Moreover, UPS is working hard to expand its presence. Though positive on such efforts, we believe that expansion related expenses might drag down fourth-quarter earnings.

What the Zacks Model Unveils?

Our proven model shows that UPS is likely to beat earnings estimates this quarter. A stock needs to have both - a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) - for this to happen.

Zacks Rank : UPS carries a Zacks Rank #3.

Zacks ESP : UPS has Earnings ESP of +0.10%. A positive ESP combined with the company's Zacks Rank #3, makes us reasonably confident of an earnings beat. You may uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

United Parcel Service, Inc. Price and EPS Surprise

United Parcel Service, Inc. Price and EPS Surprise | United Parcel Service, Inc. Quote

Other Stocks That Warrant a Look

UPS is not the only company looking up this time around. Here are other stocks from the broader Zacks transportation industry that you may want to consider as our model shows that it has the right combination for an earnings beat this quarter:

Expeditors International of Washington, Inc. EXPD , which is scheduled to report fourth-quarter results on Feb 20, has a Zacks Rank #1 and an Earnings ESP of +1.30%.

Allegiant ALGT has an Earnings ESP of +1.09% and a Zacks Rank of 3. The company will release fourth-quarter earnings numbers on Jan 31. You can see the complete list of today's Zacks #1 Rank stocks here.

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United Parcel Service, Inc. (UPS): Free Stock Analysis Report

FedEx Corporation (FDX): 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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