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UPS Stock Declines Following Cautious Guidance for 2023

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Management at United Parcel Service (UPS - Free Report) announced strategic priorities, three-year financial goals and new ESG (Environmental, Social and Governance) targets ahead of its investor and analyst day event, which was held yesterday.

The company expects consolidated revenues for 2023 in the $98-$102 billion band. The Zacks Consensus Estimate for 2023 revenues is currently pegged at $85.1 billion. Adjusted operating margin for 2023 is expected in the 12.7-13.7% range. Cumulative capital spending in the 2021-2023 time frame is anticipated in the $13.5-$14.5 billion band. Adjusted return on invested capital for 2023 is anticipated in the approximate 26-29% range.

It seems that investors were expecting an even better guidance from UPS, given that its shares have had a stellar run on the bourses so far this year. On a year-to-date basis, shares of the company have gained 19.4%, above the S&P 500 Index’s 13.4% appreciation.

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Due to this investor disappointment, shares of UPS declined 4.2% to $201.06 on Wednesday. However, the downside was not just limited to UPS as shares of its rival FedEx (FDX - Free Report) also dipped 3.1%.

Apart from announcing the 2023 projections, UPS pledged to be carbon neutral across scope 1, 2 and 3 emissions in its global operations by 2050 as part of its new ESG targets. Moreover, the company set a few interim 2035 environmental sustainability targets per which, it aims to bring about a 50% reduction in carbon dioxide per package delivered for its global small package operations (notably, 2020 is considered the base year).

The company also aims to ensure that by 2035, all its facilities are powered by renewable electricity. Moreover, 30% of the fuel used in its global air fleet by that year should be sustainable aviation fuel.

In line with its customer-first approach, UPS looks to achieve Net Promoter Score or NPS of 50 or more in 2023. Notably, this customer-oriented policy focuses on removing all kinds of obstacles while doing business with the company. This is measured by the proportion of gains in NPS.

Zacks Rank & Other Key Picks

UPS currently carries a Zacks Rank #2 (Buy). Investors interested in the Zacks  Transportation  sector may also consider  Landstar System, Inc. (LSTR - Free Report)   and  Herc Holdings Inc. (HRI - Free Report) , both currently sporting a Zacks Rank #1 (Strong Buy). You can see  the complete list of today’s Zacks #1 Rank stocks here.

Long-term (three to five years) expected earnings per share growth rate for Landstar and Herc Holdings is projected at 12% and 42.9%, respectively.

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