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Will Solid E-commerce Growth Boost UPS' Earnings in Q1?

Zacks Equity Research

United Parcel Service, Inc. UPS is scheduled to report first-quarter 2019 results on Apr 25, before the market opens.

In the last reported quarter, the company delivered a positive surprise of 1.6%. Moreover, the bottom line improved on a year-over-year basis. Although revenues fell short of the Zacks Consensus Estimate, the same increased year over year, primarily on the back of the company’s impressive performance in the holiday season.

Let’s see how things shape up for this announcement. Notably, the Zacks Consensus Estimate for first-quarter earnings has moved 11.8% south in the last 90 days.

Factors Likely at Play

UPS has been making significant investments in the facilities’ upgrade to meet surging demand following rapid e-commerce growth. These high capital expenditures might weigh on the company’s bottom-line growth in the first quarter.

Moreover, with UPS having a substantial exposure in China, trade tensions between the United States and China might impact results in the quarter.

However, similar to the last few quarters, solid e-commerce growth is likely to boost the top line in the first quarter as well. Expanded package volumes at the U.S. Domestic Package segment are anticipated to aid the segmental results. Notably, the Zacks Consensus Estimate for first-quarter U.S. Domestic Package revenues stands at $10,687 million, higher than $10,227 million reported a year ago.

Additionally, the international package segment’s encouraging performance should drive the top line in the soon-to-be-reported quarter. The Zacks Consensus Estimate for first-quarter International Package revenues is pegged at $3,660 million, higher than the year-earlier reported figure of $3,533 million.

Meanwhile, the consensus mark for revenues at the Supply Chain and Freight segment is pegged at $3,433 million compared with $3,353 million reported in the prior year.

United Parcel Service, Inc. Price and EPS Surprise

 

United Parcel Service, Inc. Price and EPS Surprise | United Parcel Service, Inc. Quote


Earnings Whispers

Our proven model clearly indicates that a company needs to have the right combination of the following two key ingredients — a positive Earnings ESP and a favorable Zacks Rank #3 (Hold) or better — to increase the odds of an earnings surprise. However, that is not the case here as highlighted below.

Earnings ESP: UPS has an Earnings ESP of -0.56% as the Most Accurate Estimate is pegged at $1.41, lower than the Zacks Consensus Estimate of $1.42. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: UPS carries a Zacks Rank of 3, which increases the predictive power of ESP. However, the company’s negative ESP leaves the surprise prediction inconclusive.

We caution against all Sell-rated stocks (#4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Investors interested in the broader Transportation sector may consider C.H. Robinson Worldwide, Inc. CHRW, SkyWest, Inc. SKYW and Werner Enterprises, Inc. WERN as these stocks possess the perfect mix of elements to beat on earnings in the upcoming quarterly releases.

C.H. Robinson has an Earnings ESP of +0.22% and is a #3 Ranked player. The company will release first-quarter earnings numbers on Apr 30.

SkyWest has an Earnings ESP of +0.83% and a Zacks Rank #2 (Buy). The company is scheduled to announce first-quarter results on Apr 25. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Werner has an Earnings ESP of +2.06% and is a Zacks #3 Ranked player. The company is set to report first-quarter financial figures on Apr 25.

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SkyWest, Inc. (SKYW) : Free Stock Analysis Report
 
C.H. Robinson Worldwide, Inc. (CHRW) : Free Stock Analysis Report
 
Werner Enterprises, Inc. (WERN) : Free Stock Analysis Report
 
United Parcel Service, Inc. (UPS) : Free Stock Analysis Report
 
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