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United Parcel Service, Inc. (UPS), headquartered in Atlanta, Georgia, provides transportation and delivery, distribution, contract logistics, ocean freight, airfreight, customs brokerage, and insurance services. Valued at $110.3 billion by market cap, UPS is a leading provider of global supply chain management solutions and delivers packages each business day for 1.6 million shipping customers to 10.2 million delivery customers in over 200 countries and territories.
Shares of this logistics giant have underperformed the broader market considerably over the past year. UPS has declined 24.1% over this time frame, while the broader S&P 500 Index ($SPX) has rallied nearly 27.8%. In 2024, UPS stock is down 18.7%, while SPX is up 17.8% on a YTD basis.
Narrowing the focus, UPS has also lagged behind the Pacer Industrials and Logistics ETF (SHPP). The exchange-traded fund has gained about 5.3% over the past year. Moreover, the ETF’s marginal gains on a YTD basis outshine the stock’s double-digit losses over the same time frame.
UPS' grim price action this year can be attributed to fluctuations in shipping demand and pricing. While the second quarter showed signs of improvement with volume growth in the U.S., higher expenses related to a new labor agreement and regulatory charges resulted in lower earnings than expected.
On Jul. 23, UPS shares closed down more than 12% after reporting its Q2 results. Its adjusted EPS of $1.79 missed Wall Street expectations of $1.98, primarily due to wage pressure and soft demand. Its revenue was $21.8 billion, also missing Wall Street estimates of $22.2 billion.
On a positive note, the company revised its full-year revenue forecast to about $93 billion from the previous forecast of between $92 billion and $94.5 billion. For fiscal 2024, UPS expects adjusted operating margin to be around 9.4%, compared to the prior expectation of 10% to 10.6%.
For the current fiscal year, ending in December, analysts expect UPS’ EPS to decline 14.9% to $7.47 on a diluted basis. The company’s earnings surprise history is mixed. It beat the consensus estimate in three of the last four quarters while missing the forecast on another occasion.
Among the 23 analysts covering UPS stock, the consensus is a “Moderate Buy.” That’s based on 11 “Strong Buy” ratings, 11 “Holds,” and one “Strong Sell.”
This configuration is more bullish than a month ago, with 10 analysts suggesting a “Strong Buy.”
On Aug. 13, Wells Fargo & Company (WFC) analyst Christian Wetherbee maintained a “Buy” rating on UPS with a price target of $134, implying a potential upside of 4.8% from current levels. The overall rating stems from a thorough evaluation of the company's financial health and growth prospects.
The mean price target of $143.79 represents a 12.4% premium to UPS’ current price levels. The Street-high price target of $182 suggests an ambitious upside potential of 42.3%.
On the date of publication, Rashmi Kumari did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
