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United Parcel Service (UPS - Free Report) is a Zacks Rank #5 (Strong Sell) that is a global logistics and package delivery company that provides transportation, distribution, and supply chain management services
The stock recently his 2024 lows after a big earnings miss and a cut in revenue guidance. Investors have had a difficult year, with the stock down almost 20%, with the overall market higher.
Despite the down move, there is still room lower as the stock threatens to erase all the post-Covid lows.
About the Company
UPS was founded in 1907 and is headquartered in Atlanta, Georgia. The company employs over 500,000 people and operates through two segments, U.S. Domestic Package and International Package.
UPS is valued at $108 billion and has a Forward PE of 16. The stock holds Zacks Style Scores of “B” in Growth, but “C” in Value. UPS pays a dividend of just over 5%.
Q2 Earnings
UPS was coming into the quarter on an EPS winning streak of 16 quarters. Despite that, the stock has been weak over the last year. So when the company reported a 10% EPS miss, the stock fell apart.
The company reported a significant drop in profits, with net income falling over 30% from the previous year. This decline was driven by a 1.1% decrease in consolidated revenue to $21.8 billion and a sharp drop in operating profit by 30.1%.
Additionally, UPS narrowed its revenue outlook for the full fiscal year and lowered its operating margin projections, reducing investor confidence. Despite some positive developments, such as a return to volume growth in the U.S. market and the restart of the share repurchase program, these were overshadowed by the disappointing financial results, leading to the stock's decline.
Earnings Estimates
After the earnings report, analysts quickly cut their estimates and price targets for UPS.
For the current quarter, the last seven days have seen estimates reduced from $2.05 to $1.72, or 16%.
Next quarter looks slightly better, with numbers falling from $2.67 to $2.59, or 3%.
However, the current year looks rough. Over the last 7 days, estimates have dropped 5%, going from $8.15 to $7.71.
Many firms lowered their price targets along with estimates. Barclays has one of the lower targets after maintaining its equal weight, but dropping its target to $120 from $145.
Technical Take
The stock hit 2024 lows after earnings and it was under $120 it would erase all the post-Covid gains the stock saw after its 7/20 quarter that started a 100% rally in the name.
Before that break out, UPS traded in a range of $100-120. If the stock falls below $120 and back into that range look for some long-term consolidation in that area with the dividend and the $100 level being strong support. That area is still a long way down from current prices, so investors can be patient buying UPS.
In Summary
The trucking and logistics industry is going through some challenges. Two weeks ago we saw J.B. Hunt disappoint and now UPS. While a lot of this misery is priced investors are better off in stocks trending in the right direction.
For those interested in the space, a better option might be FedEx (FDX - Free Report) . The stock is a Zacks Rank #3 (Hold) that is coming off an earnings beat and is trading near 2024 highs.
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Bear of the Day: United Parcel Service (UPS)
United Parcel Service (UPS - Free Report) is a Zacks Rank #5 (Strong Sell) that is a global logistics and package delivery company that provides transportation, distribution, and supply chain management services
The stock recently his 2024 lows after a big earnings miss and a cut in revenue guidance. Investors have had a difficult year, with the stock down almost 20%, with the overall market higher.
Despite the down move, there is still room lower as the stock threatens to erase all the post-Covid lows.
About the Company
UPS was founded in 1907 and is headquartered in Atlanta, Georgia. The company employs over 500,000 people and operates through two segments, U.S. Domestic Package and International Package.
UPS is valued at $108 billion and has a Forward PE of 16. The stock holds Zacks Style Scores of “B” in Growth, but “C” in Value. UPS pays a dividend of just over 5%.
Q2 Earnings
UPS was coming into the quarter on an EPS winning streak of 16 quarters. Despite that, the stock has been weak over the last year. So when the company reported a 10% EPS miss, the stock fell apart.
The company reported a significant drop in profits, with net income falling over 30% from the previous year. This decline was driven by a 1.1% decrease in consolidated revenue to $21.8 billion and a sharp drop in operating profit by 30.1%.
Additionally, UPS narrowed its revenue outlook for the full fiscal year and lowered its operating margin projections, reducing investor confidence. Despite some positive developments, such as a return to volume growth in the U.S. market and the restart of the share repurchase program, these were overshadowed by the disappointing financial results, leading to the stock's decline.
Earnings Estimates
After the earnings report, analysts quickly cut their estimates and price targets for UPS.
For the current quarter, the last seven days have seen estimates reduced from $2.05 to $1.72, or 16%.
Next quarter looks slightly better, with numbers falling from $2.67 to $2.59, or 3%.
However, the current year looks rough. Over the last 7 days, estimates have dropped 5%, going from $8.15 to $7.71.
Many firms lowered their price targets along with estimates. Barclays has one of the lower targets after maintaining its equal weight, but dropping its target to $120 from $145.
Technical Take
The stock hit 2024 lows after earnings and it was under $120 it would erase all the post-Covid gains the stock saw after its 7/20 quarter that started a 100% rally in the name.
Before that break out, UPS traded in a range of $100-120. If the stock falls below $120 and back into that range look for some long-term consolidation in that area with the dividend and the $100 level being strong support. That area is still a long way down from current prices, so investors can be patient buying UPS.
In Summary
The trucking and logistics industry is going through some challenges. Two weeks ago we saw J.B. Hunt disappoint and now UPS. While a lot of this misery is priced investors are better off in stocks trending in the right direction.
For those interested in the space, a better option might be FedEx (FDX - Free Report) . The stock is a Zacks Rank #3 (Hold) that is coming off an earnings beat and is trading near 2024 highs.