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United Parcel Grapples With Varied Issues: Time to Dump?

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United Parcel Service Inc. (UPS - Free Report) has gained a nominal 0.02% in the last one year, significantly underperforming the Zacks Transportation-Air Freight industry that recorded a 5.7% increase in the period.

 

United Parcel struggled in the recent holiday season due to higher costs associated with package deliveries. It expects 2017 adjusted earnings per share in the band of $5.80 to $6.10, which includes $400 million of pre-tax currency headwinds. Foreign currency-related issues are also expected to hurt 2017 results. The Zacks Consensus Estimate for first-quarter earnings has come down by 3 cents to $1.30 over the last 60 days. Higher costs are likely to hurt its first quarter 2017 results.

We note that rival FedEx (FDX - Free Report) recently reported lower-than-expected earnings in third-quarter fiscal 2017 (ended Feb 28, 2017). Moreover, earnings declined 6.4% on a year-over-year basis. The bottom line was primarily hurt by significantly higher costs. Elevated expenses pertaining to package deliveries in the recent holiday season led to the year-over-year decline.

United Parcel’s disappointing view for full-year 2017 is also a dampener. In view of such a gloomy scenario, we believe investors would do well to dump this Zacks Rank #4 (Sell) stock from their portfolios currently.

Zacks Rank & Key Picks

Better-ranked stocks in the broader transportation sector are Radiant Logistics (RLGT - Free Report) and Aegean Marine Petroleum Network . Both these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Radiant Logistics and Aegean Marine gained over 28% and 18%, respectively, on a year-to-date basis.

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