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UPS' Q1 Earnings and Revenues Miss Estimates, Stock Down

Zacks Equity Research

United Parcel Service’s UPS first-quarter 2019 earnings (excluding 11 cents from non-recurring items) of $1.39 per share fell short of the Zacks Consensus Estimate by 3 cents. The bottom line also declined 10.3% on a year-over-year basis. Unfavorable weather conditions in the United States negatively impacted first-quarter 2019 earnings by 7 cents.

UPS recorded revenues of $17,160 million in the quarter, which missed the Zacks Consensus Estimate of $17,793.7 million. However, the top line marginally increased on a year-over-year basis.

UPS’ underperformance on the top- and bottom-line front disappointed investors. Consequently, the stock shed value in pre-market trading.

Segmental Details

U.S. Domestic Package revenues climbed 2.5% year over year to $10,480 million in the first quarter driven by a 2.9% increase in revenue per piece. Impressive growth in commercial Ground products aided segmental results. Average daily volume for air products increased nearly 8% on the back of impressive demand for faster delivery options.  Segmental operating profit declined in the quarter mainly due to harsh winter weather.

Revenues at the international package division came in at $3,459 million. Revenue per piece decreased 1.2%. However, the same increased 2.3% on a currency-adjusted basis, driven by a 3.9% gain in domestic products. Segmental operating profit came in at $528 million in the reported quarter. On an adjusted basis, segmental operating profit was $612 million. Factors like prudent cost management and impressive revenue yields aided results. Segmental operating margin expanded 90 basis points to 17.7% on an adjusted basis.

Supply Chain and Freight revenues decreased in excess of 3% to $3,221 million. Operating profits in the segment increased in excess of 24% on an adjusted basis to $211 million in the first quarter aided by prudent cost management actions.

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

 

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

Other Details

UPS, carrying a Zacks Rank #3 (Hold), generated free cash flow of around $760 million in the first quarter of 2019.  Cash from operations were $2.3 billion. The company spent $1.5 billion as capital expenditure in the reported quarter. Moreover, UPS paid approximately $867 billion as dividend to shareholders in the quarter, up 5.5%. Additionally, it bought back 2.4 million shares for $250 million. We are impressed with the company’s efforts to reward shareholders consistently through buybacks and dividend payouts.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Outlook

UPS still expects 2019 adjusted earnings per share between $7.45 and $7.75. The mid-point of the guided range ($7.60 per share) is above the Zacks Consensus Estimate of $7.52. Tax rate in 2019 is anticipated between 23% and 24%. Adjusted free cash flow for 2019 is projected between $3.5 and $4 billion.

Upcoming Releases

Investors interested in the Zacks Transportation sector are keenly awaiting first-quarter earnings reports from key players, such as Expeditors International of Washington EXPD , C.H. Robinson Worldwide CHRW and Air Lease Corporation AL . While C.H. Robinson will report first-quarter earnings on Apr 30, Expeditors and Air Lease will announce the same on May 7 and May 9, respectively.

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Air Lease Corporation (AL) : Free Stock Analysis Report
 
C.H. Robinson Worldwide, Inc. (CHRW) : Free Stock Analysis Report
 
Expeditors International of Washington, Inc. (EXPD) : Free Stock Analysis Report
 
United Parcel Service, Inc. (UPS) : Free Stock Analysis Report
 
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