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Why Is UPS (UPS) Up 14.8% Since Last Earnings Report?

Zacks Equity Research

It has been about a month since the last earnings report for United Parcel Service (UPS). Shares have added about 14.8% in that time frame, outperforming 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

The company’s earnings (excluding 10 cents from non-recurring items) per share of $2.13 surpassed the Zacks Consensus Estimate of $1.04. The bottom line also improved 8.7% year over year. Results were aided by expanded residential delivery volumes, thanks to coronavirus confining people to their homes, increase in healthcare shipments and strong outbound demand from Asia. UPS generated revenues worth $20,459 million in the quarter, outperforming the Zacks Consensus Estimate of $17,344.4 million. Moreover, the top line improved 13.4% on a year-over-year basis. Results were aided by 20.9% growth in average daily volumes. Also, operating profit climbed 7.4% on an adjusted basis in the second quarter towing to a robust rise inInternational Package segment’s operating profit.

Segmental Details

U.S. Domestic Package revenues ascended 17.3% year over year to $13,074 million in the second quarter, driven by a 22.8% rise in average daily volumes. Demand for residential delivery soared, leading to a 65.2% jump in business-to-consumer shipments. Segmental operating profit (adjusted) dipped marginally to $1,215 million in the quarter. Revenues at the International Package division came in at $3,705 million, up 5.7%. Average daily volumes rose 9.8% owing to strong outbound demand from Asia and increased cross-border e-commerce in Europe.Segmental operating profit (adjusted) totaled $842 million in the reported quarter, up 26.6%.

Supply Chain and Freight revenues climbed 8.5% to $3,680 million owing to higher demand for air freight forwarding from Asia. Operating profits (on an adjusted basis), however, dipped 2.2% to $158 million in the second quarter.

Other Details

Cash from operations were $5.9 billion. UPS, generated free cash flow of $3.9 billion on an adjusted basis in the first six months of 2020. The company’scapital expenditures (adjusted) were $2,098 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 21.15% due to these changes.

VGM Scores

At this time, UPS has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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 trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise UPS has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.



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Zacks Investment Research