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United Parcel Service Reports Q3 Earnings Beat, Stock Slips

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United Parcel Service’s third-quarter earnings

United Parcel Service (UPS), the world’s leading express courier service provider, announced its third-quarter earnings results on October 24. The logistics (XTN) giant surpassed Reuters-surveyed analysts’ adjusted EPS estimate of $1.81 by $0.01.

The parcel delivery giant’s adjusted earnings per share of $1.82 in the third quarter were up 25.5% YoY (year-over-year) from $1.45 in the third quarter of 2017. On a reported basis, UPS’s third-quarter earnings reached $1.73, up 19.3% from $1.45 in the third quarter of 2017.

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UPS’s stock price movement

Investor sentiment is usually high for global parcel delivery giants such as UPS and FedEx (FDX). These companies’ results offer insight into global economic activities.

In the third quarter, the YoY revenue growth for United Parcel Service’s International Package segment didn’t meet expectations. The segment’s operating profit declined ~11.6% YoY due to global trade-related concerns and currency translations in emerging markets.

On October 25, UPS stock opened at $107.05, marginally down from the previous trading session’s closing price. The stock rose and touched an intraday high of $109.23. Its intraday low was $105.61. On that day, UPS stock closed at $107.82, a minor decline from its closing price of $107.93 on October 24.

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Peers’ Q3 earnings

Transportation and logistics companies’ top-line and bottom-line growth improved in the third quarter. In the LTL (less-than-truckload) sector, Old Dominion Freight Line (ODFL) beat analysts’ adjusted EPS estimate of $1.97 by a wide margin of 7.5%. Old Dominion Freight Line’s adjusted EPS came in at $2.12 in the quarter, up ~71.0% YoY from $1.19 in the third quarter of 2017.

LTL service provider Saia (SAIA) plans to release its third-quarter earnings on October 31. YRC Worldwide (YRCW) and XPO Logistics (XPO) plan to announce their third-quarter earnings on November 1.

Management outlook

United Parcel Service (UPS) maintained a positive outlook for the fourth quarter. The company increased its 2018 free cash flow guidance to ~$5.0 billion. It also reaffirmed its fiscal 2018 EPS guidance range of $7.03–$7.37, up 17.0%–23.0% YoY. Its 2018 capex is expected to be $6.5 billion–$7.0 billion.

UPS expects its fourth-quarter adjusted EPS to increase 15.0% YoY amid expected currency translation issues in emerging markets and one less operating day during the 2018 peak season.

In this post-earnings series, we’ll discuss United Parcel Service’s segmental results and take a look at analysts’ recommendations for its stock.

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