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UPS Q2 Preview: Can It Deliver Another EPS Beat?

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It’s that time of the year again. Earnings season has officially kicked off, with a multitude of companies reporting quarterly results daily.

Investors are anxious to see how companies have fought back against skyrocketing inflation, supply chain disruptions, and increased labor costs. Needless to say, we’ve found ourselves in a highly unique economic situation.

One company slated to release its 2022 Q2 results next week on Tuesday before the opening bell is the widely-recognized United Parcel Service UPS. United Parcel Service is the world's largest express carrier and package delivery company.

In addition, UPS is currently a Zacks Rank #3 (Hold) with an overall VGM Score of an A.

We see them delivering packages all the time. Can they deliver in their quarterly report? Let’s take a closer look at how the company is standing heading into the earnings release.

Share Performance & Valuation

Year-to-date, UPS shares have struggled notably, declining more than 11% in value. However, shares have outperformed its Zacks Sector by a fair margin, undoubtedly a positive.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Upon widening the timeframe to encompass a year’s worth of price action, we can see that UPS shares traded sideways for some time from late 2021 to early 2022 but have overall declined nearly 10% in this timeframe.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

UPS shares could be considered undervalued, further displayed by its Style Score of a B for Value. The company’s forward earnings multiple resides at 14.6X, well below its five-year median of 16.4X and nowhere near highs of 25.6X in 2020.

In addition, shares trade at an enticing 17% premium relative to the S&P 500.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Growth Estimates

The Zacks Consensus EPS Estimate for the quarter to be reported resides at $3.15, reflecting a solid 3% uptick in quarterly earnings year-over-year. In addition, one analyst has upgraded their earnings outlook for the upcoming quarter.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Top-line projections also display strength; UPS is forecasted to generate $24.8 billion in revenue for the quarter, a solid 5.7% uptick compared to year-ago quarterly sales of $23.4 billion.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Quarterly Performance & Share Reactions

Recording bottom-line beats has been the norm for UPS – the company has impressively chained together eight consecutive EPS beats. In its latest quarter, UPS recorded a solid 6.3% bottom-line beat.

Quarterly revenue results have been stellar as well. Over the company’s previous ten quarterly reports, it’s posted nine top-line beats, all by at least 1.5%.

The market has generally reacted positively to EPS beats as of late, with shares increasing in value following four of the company’s previous six bottom-line beats.

Bottom Line

UPS looks to register single-digit revenue and earnings growth, undoubtedly a major positive amid a harsh macroeconomic backdrop.

In addition, quarterly results have been robust, and the company sports solid valuation levels. For these reasons, investors should feel optimistic heading into the quarterly report.


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