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Will United Parcel (UPS) Disappoint Q3 Earnings?

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United Parcel Services Inc. (UPS - Free Report) , the world's largest express carrier and package delivery company, is set to release its third quarter 2013 results before the opening bell on Oct 25, 2013.

In the last quarter, the company managed to meet its earnings estimate. Let’s see how things are shaping up for this announcement.

Factors to Consider This Past Quarter

The company has taken various strategic measures such as collaborations with other leading firms, a well-defined business model, constant technology upgrades and freight rate hikes to maintain its industry leading position.  Additionally, the company was engaged in the expansion of distribution facilities dedicated to health care in the key markets of North and South America to tap the opportunities in the health care business.

However, we remain concerned about a sluggish European market and the heavy expansion plans that the company is undertaking internationally. Economic instability in Asia has further aggravated the risk of the company as a significant portion of its revenue come from international markets. Further, UPS operates in a competitive environment which only gets worse with industry consolidation.

Earnings Whispers

Our proven model does not conclusively show that UPS is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.

Negative Zacks ESP: This is because the Most Accurate estimate stands at $1.15 while the Zacks Consensus Estimate is higher at $1.16. This leads to an ESP of -0.86% for UPS.

Zacks Rank: UPS’ Zacks Rank #3 (Hold), however, increases the predictive power of ESP. Nevertheless, we also need to have a positive ESP to be confident of an earnings surprise call.

We caution investors against the stock going into the earnings announcement, as a Zacks earnings ESP of -0.86% combined with a Zacks Rank #3 lowers the possibility of an earnings surprise.

Other Stocks to Consider

Here are some companies to consider as our model shows these have the right combination of elements to post an earnings beat this quarter:

XPO Logistics Inc. (XPO - Free Report) has earnings ESP of +20.46% and carries a Zacks Rank #3 (Hold).

Old Dominion Freight Line Inc. (ODFL - Free Report) has earnings ESP of +2.90% and carries a Zacks Rank #3 (Hold).

Fedex Corp. (FDX - Free Report) has earnings ESP of +2.47% and carries a Zacks Rank #3 (Hold).

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