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UPS (UPS) Up 0.4% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for United Parcel Service (UPS). Shares have added about 0.4% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is UPS due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Earnings Beat at UPS in Q2

UPS' earnings (excluding a penny from non-recurring items) of $3.06 per share, beat the Zacks Consensus Estimate of $2.75. The bottom line surged 43.7% year over year with strong performances across all segments.

Quarterly revenues of $23,424 million also outperformed the Zacks Consensus Estimate of $23,085.4 million. The top line increased 14.5% year over year, driven by higher package delivery demand. Overall operating profit soared 47.3% year over year to $3.3 billion in the second quarter, boosted by double-digit growth in adjusted operating profit across all segments..

At the end of the second quarter, UPS generated free cash flow of $6,804 million, up 74.7% year over year.  The company’s capital expenditures were $1,670 million at the end of the same period.

Segmental Detail

U.S. Domestic Package revenues increased 10.2% year over year to $14,402 million in the second quarter, driven by 13.4% increase in revenue per piece owing to robust improvement in all products. Segmental operating profit (adjusted) jumped 37.9% year over year to $1,675 million in the quarter. Adjusted operating margin in the June quarter was 11.6%.

Revenues at the International Package division summed $4,817 million, up 30%. The segment’s performance was driven by strong demand in Europe. Segmental operating profit (adjusted) totaled $1,190 million in the reported quarter, up 41.3%.

Supply Chain Solutions revenues augmented 14.3% to $4,205 million, aided by strength in demand across all businesses. Operating profit (on an adjusted basis) soared 52.8% to $408 million in the June quarter.

Outlook

UPS anticipates consolidated operating margin to be approximately 12.7% in the current year. Return on invested capital is expected to be approximately 28%. Capital expenditures are estimated to be $4 billion in 2021. For the remainder of the year, the company expects effective tax rate of about 23%.


 




 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

At this time, UPS has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, UPS has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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