Why Analysts Expect United Parcel Service’s Q1 Earnings to Fall



Earnings likely to fall

United Parcel Service (UPS) is scheduled to report its first-quarter earnings results on April 25. The delivery giant has an impressive record of beating earnings estimates, as it has surpassed analysts’ expectations for the past eight quarters with an average surprise of 1.7%. Additionally, UPS has reported double-digit earnings growth in each of the last four quarters.

However, Wall Street analysts expect the company to report a YoY (year-over-year) fall in the first quarter. In the quarter, analysts expect UPS to report adjusted EPS of $1.41, a YoY fall of 8.7% from its EPS of $1.55 in the first quarter of 2018.

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What’s driving this pessimism?

Analysts expect UPS’s revenue growth to slow in the first quarter on concerns about the slowing global economy. They expect the company’s sales to rise 3.9% YoY to $17.8 billion. This expected growth rate is significantly lower than the growth of more than 9% UPS reported in the previous year.

Last month, the company’s rival FedEx (FDX) reported dismal revenue growth for the third quarter of fiscal 2019 due to the economic slowdown in Europe and Asia–particularly in China. The company noted that the ongoing trade dispute had weakened the logistics and delivery business in China. FDX’s fiscal 2019 third-quarter revenue rose a mere 2.9% YoY compared to the growth of more than 9% it had registered in the previous five quarters.

Analysts believe that the factors highlighted by FDX will also hurt UPS’s first-quarter financial results. Higher costs and delivery expenses due to increased investments in facility upgrades could also weigh on UPS’s bottom line results.

Most of UPS’s peers (IYT) plan to report their first-quarter earnings results in the next few weeks. Analysts’ first-quarter expectations for XPO Logistics (XPO) and Old Dominion Freight Lines (ODFL) project YoY revenue rises of 1.6% and 7.5%, respectively. The earnings estimate for ODFL implies a potential YoY rise of 18.7%, while the estimate for XPO implies a potential YoY fall of 33.8%.


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