After United Parcel Service Inc’s (NYSE:UPS) earnings announcement in June 2018, analyst consensus outlook appear cautiously optimistic, with profits predicted to increase by 24.2% next year against the past 5-year average growth rate of 8.3%. With trailing-twelve-month net income at current levels of US$5.19b, we should see this rise to US$6.45b in 2019. Below is a brief commentary around United Parcel Service’s earnings outlook going forward, which may give you a sense of market sentiment for the company. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
What can we expect from United Parcel Service in the longer term?
The longer term view from the 22 analysts covering UPS is one of positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. To understand the overall trajectory of UPS’s earnings growth over these next fews years, I’ve fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.
This results in an annual growth rate of 9.0% based on the most recent earnings level of US$4.91b to the final forecast of US$7.27b by 2021. EPS reaches $8.94 in the final year of forecast compared to the current $5.64 EPS today. The primary reason for earnings growth is due to cost cutting activities, as revenues is expected to grow much slower than earnings. With a current profit margin of 7.5%, this movement will result in a margin of 9.2% by 2021.
Future outlook is only one aspect when you’re building an investment case for a stock. For United Parcel Service, there are three key aspects you should further research:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is United Parcel Service worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether United Parcel Service is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of United Parcel Service? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.