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UPS Gears up to Report Q4 Earnings: What's in the Offing?

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United Parcel Service (UPS - Free Report) is scheduled to report fourth-quarter 2020 earnings on Feb 2, before market open.

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has been revised 0.5% upward over the past 60 days. Moreover, the company has an impressive earnings history. Its bottom line outperformed the Zacks Consensus Estimate in three of the last four quarters and lagged the same in the remaining quarter. It has a trailing four-quarter earnings surprise of 30.7%, on average.

Factors to Note

The surge in e-commerce demand amid the current pandemic situation is likely to have benefited UPS’ fourth-quarter performance. The to-be-reported quarter’s results are likely to reflect significant increase in home deliveries amid the ongoing coronavirus outbreak. Solid demand for residential delivery is likely to have aided shipments in the December quarter. The Zacks Consensus Estimate for average daily package volume suggests an increase of 8.3% on a year-over-year basis.

Higher demand for residential delivery is expected to have contributed to the performance of the U.S. Domestic Package segment, which accounts for bulk of the top line. The Zacks Consensus Estimate for segmental revenues is currently pegged at $14,761 million, indicating a 10.1% improvement from the prior-year quarter.

The Zacks Consensus Estimate for revenues at the International Package Division currently stands at $4,180 million, suggesting a 11.1% rise from the year-ago reported figure. Strong outbound demand from Asia might have supported segmental performance.

However, adjusted operating profit at U.S. Domestic Package segment might have been dented by coronavirus-induced supply-chain disruptions. Per the consensus, the same has declined 17.5% from the reported figure last year.

Earnings Whispers

The proven Zacks model predicts an earnings beat for UPS this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: UPS has an Earnings ESP of +0.90% as the Most Accurate Estimate is higher than the Zacks Consensus Estimate of $2.10 by 2 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: UPS carries a Zacks Rank #3, currently.

Highlights of Q3 Earnings

UPS' earnings (excluding 4 cents from non-recurring items) per share of $2.28 surpassed the Zacks Consensus Estimate of $1.86. The bottom line also improved 10.1% year over year. UPS generated revenues worth $21,238 million in the quarter, outpacing the Zacks Consensus Estimate of $20,079.6 million. Moreover, the top line improved 15.9% on a year-over-year basis, driven by growth across all segments.

Other Stocks to Consider

Investors interested in the broader Transportation sector may also consider American Airlines Group Inc. ((AAL - Free Report) ), Knight-Swift Transportation Holdings Inc. ((KNX - Free Report) ) and Landstar System, Inc. ((LSTR - Free Report) ), as these stocks possess the right combination of elements to beat estimates this reporting cycle.

American Airlines has an Earnings ESP of +2.10% and is Zacks #3 Ranked, presently. The company is slated to release fourth-quarter 2020 results on Jan 28.

Knight-Swift has an Earnings ESP of +1.10% and a Zacks Rank of 3 at present. The company is scheduled to release fourth-quarter 2020 results on Jan 27.

Landstar System has an Earnings ESP of +0.57% and is currently a #3 Ranked player. The company is slated to release fourth-quarter 2020 results on Jan 27.

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