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United Parcel Service (UPS) Q1 Earnings: What's in Store?

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United Parcel Service, Inc. UPS is scheduled to report first-quarter 2018 results on Apr 26, before the market opens.

In the fourth quarter of 2017, the company posted earnings of $1.67, beating the Zacks Consensus Estimate of $1.65. The bottom line also increased 2.5% on a year-over-year basis. Results were aided by higher revenues.

Revenues improved 11.2% to $18,829 million from the year-ago quarter, outpacing the Zacks Consensus Estimate of $18,190.5 million.

Let’s see how things shape up for this announcement.

We expect e-commerce growth to boost results in the soon to-be-reported quarter. The company’s impressive performance in the most recent holiday season backed by e-commerce growth should aid the top line in the quarter. In fact, UPS like its rival FedEx Corporation FDX had invested substantially to meet the surge in demand during the holiday season.

Revenues at the company’s U.S. Domestic Package unit are also likely to benefit from increased package volumes. Strong performances primarily in the Deferred Air and Ground units are likely to drive segmental results. At this segment, the Zacks Consensus Estimate for first-quarter revenues is pegged at $10,117 million, higher than $9,535 million a year ago.

Furthermore, the company’s International Package division is anticipated to perform well in the first quarter on the back of robust growth in export volumes. The Zacks Consensus Estimate for revenues at this segment is pegged at $3,339 million, higher than $3,058 million a year ago.

However, we expect the company’s bottom line to be hurt by escalated costs in the to-be-reported quarter. In fact, high package delivery costs have been hurting UPS for quite some time now and the first quarter is likely to be no different. Also, UPS is working hard to expand its presence globally. Though positive on such efforts, we believe that expansion related expenses might drag down first-quarter earnings.

United Parcel Service, Inc. Price and EPS Surprise

 

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

Earnings Whispers

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

Zacks ESP: UPS has an Earnings ESP of -0.55% as the Most Accurate estimate is pegged at $1.53 per share, a penny lower than the Zacks Consensus Estimate. 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 #3, which increases the predictive power of ESP. However, a company needs to have a positive ESP to be confident about an earnings surprise.

Conversely, 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 Zacks Transportation sector may check out the following companies with the right combination of elements to beat estimates in the next releases:

Hawaiian Holdings, Inc. HA has an Earnings ESP of +2.57% and a Zacks Rank #3. The company will release first-quarter 2018 results on Apr 24. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.  

Spirit Airlines, Inc. SAVE has an Earnings ESP of +2.46% and a Zacks Rank of 3. The company will release first-quarter 2018 results on Apr 26.

Copa Holdings, S.A. CPA has an Earnings ESP of +0.75% and a Zacks Rank #3. The company is scheduled to release first-quarter results on May 9.

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