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UPS Stock Soars ~5% after Its Q4 Earnings Beat Estimates

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Surpassed expectations

United Parcel Service (UPS) stock was up ~5% in premarket trading today after the company announced better-than-expected bottom line results for the fourth quarter.

In the quarter, UPS reported adjusted EPS of $1.94, up 16.9% from the $1.66 it reported in the previous year’s quarter mainly driven by higher revenues and increased rates. Its quarterly earnings also came in above Wall Street’s expectation of $1.90.

The company’s fourth-quarter revenue rose 4.6% YoY (year-over-year) to $19.85 billion on higher volumes, expanded base rates, and favorable product and customer mixes. However, its quarterly revenue fell marginally short of analysts’ expectation of ~$20.0 billion.

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The company reported revenue growth across all its business segments. The US Domestic segment’s sales rose 6.3% YoY to $12.58 billion on higher volumes and rates. The International segment’s revenue rose 2.9% YoY to $3.83 billion, and the Supply Chain and Freight segment’s sales inched up 0.7% to $3.44 billion.

For the full year, UPS reported revenue of $71.9 billion, slightly lower than analysts’ expectation of ~$72 billion. However, on a YoY basis, its revenue rose 7.9%. Its adjusted EPS of $7.24 beat analysts’ estimate of $7.20 and rose 20.5% YoY.

Outlook

Buoyed by a strong fourth-quarter performance, UPS provided an optimistic outlook for 2019. The package delivery company expects a significant increase in operating profits across all three of its segments this year.

For the year, UPS expects its total adjusted operating profit to rise in the low teens, while it expects all three segments’ operating incomes to rise in the double digits. Its adjusted EPS for the year are expected to be between $7.45 and $7.75. Wall Street analysts’ estimate for its 2019 EPS is $7.69.

During the company’s earnings release, David Abney, its chair and CEO, said, “We achieved our 2018 adjusted earnings-per-share goal by successfully executing Transformation investments and initiatives that lifted revenue quality and improved efficiency.” He added, “Our diverse portfolio, global footprint and flexible network position UPS for profitable growth in 2019 and beyond.”

FedEx (FDX), UPS’s main competitor, reported its fiscal 2019 second-quarter earnings results in December. Its adjusted EPS of $3.94 marked a 26.7% YoY improvement. Other logistics companies (IYT), including XPO Logistics (XPO) and Saia (SAIA), have yet to report their fourth-quarter results. Analysts expect XPO and Saia to report fourth-quarter EPS of $0.84 and $0.88, signifying YoY rises of 86.7% and 66%, respectively.

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