Can UPS snap its streaks of revenue misses and post-earnings stock selloffs?


Shares of United Parcel Service Inc. slumped Monday as investors prepared for the package-delivery giant’s quarterly results, which have not been so kind to investors in the recent past.

The company is slated to reveal its fourth-quarter earnings report on Tuesday at around 6 a.m. Eastern time. UPS’s stock has declined on the day that each of its past three reports were released by an average of 5.6%, and has fallen on the day of six of its past seven reports.

UPS shares
UPS,
-0.80%

dropped 0.8% Monday. They have rallied 14% over the past three months, while shares of rival FedEx Corp.
FDX,
-1.40%

have gained 4.7% and the S&P 500 index
SPX
has advanced 18.3%.

Profit hasn’t been the problem, as UPS has beaten expectations for earnings per share in the past 14 consecutive quarters.

Revenue, however, has missed expectations for the past five quarters. The company cut its full-year revenue guidance in each of the past three quarters, and provided an outlook that was below forecasts in the quarter before that. (See below for Wall Street’s current consensus expectations for the fourth quarter.)

Read: UPS stock dives to a more than 3-year low after revenue misses expectations, again.

There’s reason to worry that another miss or outlook cut could be in the works, according to Evercore ISI analyst Jonathan Chappell. Based on his trend analysis, Chappell said “there could be further downside to UPS U.S. domestic revenue. In addition, deceleration in China’s exports is a headwind for UPS’s international revenue.”

There have also been labor-related headwinds as of late that may have allowed UPS’s rivals to benefit at its expense. When FedEx Chief Customer Officer Brie Carere was asked in December whether the company has been able to hold on to the market share it gained while UPS was undergoing tense labor negotiations, Carere answered, “Confidently yes,” according to an AlphaSense transcript.

Also read: UPS blames ‘late and loud’ Teamsters talks for revenue miss, outlook cut.

TD Cowen analyst Helane Becker said the labor issues made the fourth quarter a tough one for UPS, as the company had to figure out how to cover the cost of a new contract with the Teamsters union without driving shippers to other delivery companies.

Becker reiterated her market-perform rating on UPS’s stock, and kept her price target at $175.

The following are UPS’s current average analyst estimates compiled by FactSet for some key financial metrics, and what they were at the end of the third quarter.

  • The FactSet consensus for earnings per share was $2.46, down from $3.62 in the same period a year ago. The EPS consensus has dropped significantly since the end of the third quarter, when it was $3.03.

  • The FactSet revenue consensus was $25.398 billion, down from $27.033 billion a year ago, and below the consensus of $26.247 billion as of Sept. 29.

  • U.S. Domestic Package revenue is expected to be $17.39 billion. That compares with the consensus of $17.82 billion as of Sept. 29, and the $18.25 billion that was reported a year ago.

  • International revenue is expected to fall to $4.64 billion, from last year’s $4.95 billion. At the end of September, the consensus was $4.70 billion.

  • The FactSet consensus for 2024 revenue has declined to $95.51 billion, from $98.00 billion as of Sept. 29.



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