We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Reasons Why You Should Avoid Betting on UPS Stock Currently
Read MoreHide Full Article
United Parcel Service’s (UPS - Free Report) prospects are being hurt by low revenues as geopolitical uncertainty and higher inflation continue to dent consumer sentiment and growth expectations.
Let’s delve deep to unearth the factors responsible for making UPS stock an unattractive investment option.
Southward Earnings Estimate Revision: The Zacks Consensus Estimate for current-quarter earnings has been revised 21.3% downward in the past 60 days. For the current year, the consensus mark for earnings has moved 9.6% south in the same time frame. The unfavorable estimate revisions indicate brokers’ lack of confidence in the stock.
Unimpressive Price Performance: UPS’ shares have lost 14.2% in the past six months compared with its industry’s 2.9% decline.
Image Source: Zacks Investment Research
Other Headwinds: The deal with the Teamsters Union is likely to increase labor costs significantly. Per UPS' management, due to this deal wage and benefit costs will increase at a 3.3% compound annual growth rate for the next five years. A high proportion of the cost is likely to be booked in the first year of the contract, which expires in August 2028.
Geopolitical uncertainty and high inflation continue to hurt consumer sentiment and growth expectations, particularly in Asia and Europe. The weak demand scenario due to the economic slowdown has also led to a decline in the volume of packages shipped.
Rising capital expenses further add to its woes. In 2022, UPS incurred $4.77 billion of capital expenditures, up 13.7% year over year. Capex increased further to $5.2 billion in 2023. The capex guidance of $4 billion for 2024 is not very low. Capital expenditure spending doesn't come to an end after buying an asset. Companies need to keep up with repairs and maintenance to protect the value of the investment. Such elevated capex in this weak demand scenario may dent current-year profit margins.
UPS' financial metrics indicate that its leverage is elevated and a massive negative for its shareholders. The long-term debt burden of the company stood at $20.2 billion at the end of second-quarter 2024, which translates into a debt-to-capitalization of 54.2%, which is well above the sub-industry’s 46.8%. UPS' long-term debt burden at 2023-end was lower and stood at $18.9 billion.
Zacks Rank
UPS currently carries a Zacks Rank #4 (Sell).
Stocks to Consider
Some better-ranked stocks for investors’ consideration in the Zacks Transportation sector include C.H. Robinson Worldwide (CHRW - Free Report) and Westinghouse Air Brake Technologies (WAB - Free Report) .
CHRW, which is being well-served by its cost-reduction efforts, has an expected earnings growth rate of 25.5% for the current year. The company has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters and missed the mark once, delivering an average surprise of 7.3%. Shares of CHRW have gained 39.4% in the last six months.
WAB has a Zacks Rank #2 (Buy) at present and an expected earnings growth rate of 26% for the current year.
The company has an encouraging track record with respect to the earnings surprise, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters. The average beat is 11.8%. Shares of WAB have climbed 18% in the last six months.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Reasons Why You Should Avoid Betting on UPS Stock Currently
United Parcel Service’s (UPS - Free Report) prospects are being hurt by low revenues as geopolitical uncertainty and higher inflation continue to dent consumer sentiment and growth expectations.
Let’s delve deep to unearth the factors responsible for making UPS stock an unattractive investment option.
Southward Earnings Estimate Revision: The Zacks Consensus Estimate for current-quarter earnings has been revised 21.3% downward in the past 60 days. For the current year, the consensus mark for earnings has moved 9.6% south in the same time frame. The unfavorable estimate revisions indicate brokers’ lack of confidence in the stock.
Unimpressive Price Performance: UPS’ shares have lost 14.2% in the past six months compared with its industry’s 2.9% decline.
Other Headwinds: The deal with the Teamsters Union is likely to increase labor costs significantly. Per UPS' management, due to this deal wage and benefit costs will increase at a 3.3% compound annual growth rate for the next five years. A high proportion of the cost is likely to be booked in the first year of the contract, which expires in August 2028.
Geopolitical uncertainty and high inflation continue to hurt consumer sentiment and growth expectations, particularly in Asia and Europe. The weak demand scenario due to the economic slowdown has also led to a decline in the volume of packages shipped.
Rising capital expenses further add to its woes. In 2022, UPS incurred $4.77 billion of capital expenditures, up 13.7% year over year. Capex increased further to $5.2 billion in 2023. The capex guidance of $4 billion for 2024 is not very low. Capital expenditure spending doesn't come to an end after buying an asset. Companies need to keep up with repairs and maintenance to protect the value of the investment. Such elevated capex in this weak demand scenario may dent current-year profit margins.
UPS' financial metrics indicate that its leverage is elevated and a massive negative for its shareholders. The long-term debt burden of the company stood at $20.2 billion at the end of second-quarter 2024, which translates into a debt-to-capitalization of 54.2%, which is well above the sub-industry’s 46.8%. UPS' long-term debt burden at 2023-end was lower and stood at $18.9 billion.
Zacks Rank
UPS currently carries a Zacks Rank #4 (Sell).
Stocks to Consider
Some better-ranked stocks for investors’ consideration in the Zacks Transportation sector include C.H. Robinson Worldwide (CHRW - Free Report) and Westinghouse Air Brake Technologies (WAB - Free Report) .
C.H. Robinson Worldwide currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
CHRW, which is being well-served by its cost-reduction efforts, has an expected earnings growth rate of 25.5% for the current year. The company has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters and missed the mark once, delivering an average surprise of 7.3%. Shares of CHRW have gained 39.4% in the last six months.
WAB has a Zacks Rank #2 (Buy) at present and an expected earnings growth rate of 26% for the current year.
The company has an encouraging track record with respect to the earnings surprise, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters. The average beat is 11.8%. Shares of WAB have climbed 18% in the last six months.