International freight logistics leader XPO reported a smaller-than-expected drop in second-quarter profit Friday amid a "soft industry environment for freight transportation." The report sends mixed signals ahead of shipping giant UPS financials Tuesday. XPO and UPS stock gained ground Friday.
The Connecticut-based XPO reported EPS down 38% to 71 cents, while revenue slid 4% to $1.92 billion. Analysts predicted profit falling to 61 cents per share and revenue slipping to $1.9 billion.
XPO said the year-over-year reduction in sales was due primarily to lower fuel surcharge revenue. Chief Executive Officer Mario Harik said in a statement Friday that XPO's daily shipments increased vs. 2022 with "growth getting stronger as the quarter progressed."
XPO's average North American shipments per day increased 2% in Q2 to 51,220. For the year, the company's average North American daily shipments gained 1.7% to 50,159. However, revenue per shipment slipped 10% to $348.86 in the second quarter.
"Our yield growth also continued to improve in July, driven by our pricing initiatives," Harik said.
UPS Stock: Shipping Plays
XPO stock jumped more than 6% in Friday's stock market trade. Shares are up 115% in 2023. UPS edged up 0.2% early. Fedex climbed 0.4%. XPO stock is angling toward a sixth straight weekly advance. UPS and FDX are pointed toward their first weekly decline since June.
Meanwhile, Industry-adjacent Yellow, one of the largest trucking companies in the U.S., recently shut down and is expected to file for bankruptcy. Yellow's devalued shares, which trade below 5, jabbed 10% higher on Thursday.
FedEx posted mixed fiscal fourth-quarter results in late June. FedEx reported a 28% earnings drop to $4.94 per share while revenue fell 10.2% to $21.9 billion. FactSet analysts expected earnings diving to $4.85 per share on $22.55 billion in sales.
FDX full-year earnings tumbled 27% to $14.96 per share while revenue slipped 3.5% to $90.2 billion.
For the 2024 fiscal year, FedEx guided earnings from $16.50 to $18.50 per share on flat to low single-digit revenue growth.
UPS Reports Q2 Earnings
Analysts now await second-quarter financials from UPS. The delivery giant reports before the market opens Tuesday. Wall Street predicts EPS falling 24% to $2.50 with sales contracting 7% to $23.1 billion.
UPS stock is up 3% so far in 2023. Last week, Credit Suisse downgraded UPS to a neutral rating, down from outperform. However, the brokerage raised its price target to 204, from 200. That's about 12% above where UPS shares closed Thursday.
UPS earnings follow the company agreeing to a new labor deal with workers in late July. The tentative agreement between management and the labor union averted a potential strike on Aug. 1.
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Morgan Stanley analyst Ravi Shanker wrote on July 25 that "an early look at the deal terms implies potential financial headwinds for UPS."
"We believe investors will be pleased to see an agreement but the actual terms may come as a negative surprise," Shanker said.
"Bulls may believe that UPS can price for any inflation but we think this might be difficult given macro conditions, structural changes in the parcel delivery market and competitive risk," Shanker added.
