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Why Is UPS (UPS) Up 4.1% Since Last Earnings Report?

It has been about a month since the last earnings report for United Parcel Service (UPS). Shares have added about 4.1% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is UPS due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Earnings Beat at UPS in Q4

United Parcel Service's fourth-quarter 2023 earnings per share of $2.47 beat the Zacks Consensus Estimate of $2.44 but declined 31.7% year over year. Revenues of $24.91 billion fell short of the Zacks Consensus Estimate of $25.30 billion and decreased 7.8% year over year.

UPS generated $10.23 billion of net cash from operating activities in 2023. Capital expenditures were $5.15 billion. Free cash flow was $5.25 billion. The overall adjusted operating profit fell 27.1% year over year to $2.78 billion.

U.S. Domestic Package revenues decreased 7.3% year over year to $16.91 billion, caused by an 7.4% dip in average daily volume. The actual figure was lower than our estimate of $17.07 billion. Segmental operating profit (adjusted) plunged 32.6% year over year to $1.56 billion. The adjusted operating margin for the segment was 9.3%.

Revenues at the International Package division summed $4.60 billion, down 6.9% year over year. The downfall was due to 8.3% reduction in average daily volume mainly due to softness in Europe. The actual figure was lower than our estimate of $4.78 billion. Segmental operating profit (adjusted) totaled $899 million, down 17.6% year over year. The adjusted operating margin for the segment was 19.5%.

Supply Chain Solutions revenues of $3.39 billion fell 11.4% year over year due to market rate declines and excess market capacity in forwarding.The actual figure was lower than our estimate of $3.50 billion. Operating profit (on an adjusted basis) tumbled 20.8% to $319 million. The adjusted operating margin for the segment was 9.4%.

2024 Outlook

For 2024, UPS anticipates revenues in the range of $92-$94.5 billion and consolidated adjusted operating margin to lie between 10% and 10.6%.

Capital expenditures are anticipated to be around $4.5 billion. Further, UPS anticipates dividend payments of $5.4 billion, subject to board approval. Effective tax rate is projected to be roughly 23.5%

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How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -16.17% due to these changes.

VGM Scores

Currently, UPS has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. 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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United Parcel Service, Inc. (UPS) : Free Stock Analysis Report

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