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UPS Misses on Q1 Earnings, Scraps 2020 EPS & Revenue View

Zacks Equity Research

United Parcel Service’s UPS first-quarter 2020 earnings (excluding 4 cents from non-recurring items) per share of $1.15 lagged the Zacks Consensus Estimate by 6 cents. The bottom line also decreased 17.3% year over year. Results were hurt by the coronavirus-induced supply-chain disruptions.

Due to the uncertainty over the coronavirus pandemic, UPS withdrew its previously-issued 2020 projections for revenues and earnings per share. With dividends remaining a top priority for the company, it is suspending share buybacks for the current year. Moreover, capital expenditures for 2020 are expected to be reduced by roughly $1 billion from the previous projection. The earnings miss and the suspension of most 2020 estimates disappointed investors. Consequently, the stock lost value in early trading.

However, performance on the top-line front was encouraging despite the coronavirus woes. UPS generated revenues worth $18,035 million in the quarter, surpassing the Zacks Consensus Estimate of $17,420.3 million. Moreover, the top line improved 5.1% on a year-over-year basis. Results were aided by higher average daily volumes. However, operating profit decreased 26.4% on an adjusted basis in the first quarter due to the domestic package segment’s disappointing operating profit.

United Parcel Service, Inc. Price, Consensus and EPS Surprise

 

United Parcel Service, Inc. Price, Consensus and EPS Surprise

United Parcel Service, Inc. price-consensus-eps-surprise-chart | United Parcel Service, Inc. Quote

Segmental Details

U.S. Domestic Package revenues increased 9.3% year over year to $11,456 million in the first quarter, driven by 8.5% volume growth across all products. Notably, UPS Next Day Air volumes were up 20.5%. This uptrend was attributable to gains pertaining to automated hubs and other transformation investments. Segmental operating profit plunged more than 40% on an adjusted basis to $401 million in the quarter.

Revenues at the International Package division came in at $3,383 million, down 2%. International cost per piece dipped 0.5%, mainly  owing to currency-related impact. Segmental operating profit came in at $558 million in the reported quarter on an adjusted basis, reflecting an8.8% decrease.

Supply Chain and Freight revenues fell marginally to $3,196 million. Operating profits in the segment dropped 25.1% on an adjusted basis to $158 million in the first quarter. Results were hurt by the sluggishness in economic activity due to the pandemic.
 

Other Details

Cash from operations were $2.6 billion at the end of the reported quarter. UPS, carrying a Zacks Rank #3 (Hold), generated free cash flow of $1.6 billion on an adjusted basis in the same period. The company’scapital expenditures (adjusted) were $939 million in the quarter. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Some Other Transportation Stocks

CSX Corporation CSX reported first-quarter 2020 earnings of $1 per share, beating the Zacks Consensus Estimate of 92 cents. However, the bottom line slipped approximately 2% year over year due to weak revenues.

Union Pacific’s UNP first-quarter 2020 earnings of $2.15 per share surpassed the Zacks Consensus Estimate of $1.86. Moreover, the bottom line improved 11.4% on a year-over-year basis.

Canadian Pacific’s CP first-quarter 2020 earnings (excluding $1.08 from non-recurring items) of $3.3 (C$4.42) per share surpassed the Zacks Consensus Estimate of $2.86. Quarterly earnings also surged more than 55% year over year.

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