A month has gone by since the last earnings report for United Parcel Service (UPS). Shares have lost about 1.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is UPS due for a breakout? Well, first let's take a quick look at its latest earnings report in order to get a better handle on the recent drivers for United Parcel Service, Inc. before we dive into how investors and analysts have reacted as of late.
Earnings Beat at UPS in Q3
Quarterly earnings per share (excluding 19 cents from non-recurring items) of $1.74 beat the Zacks Consensus Estimate of $1.31 but declined 1.1% year over year. Revenues of $21.4 billion surpassed the Zacks Consensus Estimate of $20.8 billion but decreased 3.7% year over year.
Moreover, the management provided upbeat fourth-quarter sales guidance, projecting revenues of approximately $24 billion, above the Zacks Consensus Estimate of $23.74 billion. Adjusted operating margin for the December quarter is projected in the approximately 11-11.5% range, comparing favorably to the 10% reported in the September quarter.
Other Aspects of Q3 Earnings Report
U.S. Domestic Package revenues of $14.2 billion decreased 2.7% year over year, due to the expected decline in volume. However, revenue per piece and air cargo revenues were strong during the quarter. Segmental operating profit (adjusted) fell 1.5% year over year to $905 million. The adjusted operating margin for the segment was 6.4%.
Revenues in the International Package division totaled $4.67 billion, which increased 5.9% year over year, owing to a 4.8% increase in average daily volume. Segmental operating profit (adjusted) totaled $691 million, down 12.7% year over year. The adjusted operating margin for the segment was 14.8%.
Supply Chain Solutions’ revenues of $2.52 billion decreased 22.1% year over year, owing to the impact of the third quarter of 2024 divestiture of Coyote. Operating profit (on an adjusted basis) increased to $536 million. The adjusted operating margin for the segment was 21.3%.
UPS’ 2025 Outlook Maintained
Capital expenditures are estimated to be around $3.5 billion, with dividend payments expected to be around $5.5 billion (subject to board approval) and share repurchases of around $1 billion (which have been completed). The effective tax rate is expected to be around 23.75%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a upward trend in estimates review.
The consensus estimate has shifted 8.81% due to these changes.
VGM Scores
At this time, UPS has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a score of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, UPS has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
