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How Will UPS Fare in Q4 Earnings Amid Supply Chain Woes?

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United Parcel Service (UPS - Free Report) is scheduled to report fourth-quarter 2021 earnings on Feb 1, 2022, before market open.

The Zacks Consensus Estimate for the company’s fourth-quarter earnings has been revised upward by 1.3% in the past 60 days. The company has an impressive earnings surprise history, having outperformed the Zacks Consensus Estimate in each of the preceding four quarters, the average beat being 27.7%.

Let’s see how things are shaping up for UPS this earnings season:

Factors to Note

Strong package delivery demand is expected to have aided UPS’ fourth-quarter performance. Strong demand during the holiday season is anticipated to have driven the company’s top line. Higher revenue per piece is likely to get reflected in U.S. Domestic Package revenues. The Zacks Consensus Estimate for U.S. Domestic package revenues indicates an 11.1% increase from the fourth-quarter 2020 reported number.

UPS’ International Package revenues are expected to have been boosted by strong growth in all regions. The consensus mark for fourth-quarter International Package revenues suggests a 10.1% rise from the year-ago reported number.

However, supply chain challenges are likely to have hurt operations at UPS’ Supply Chain and Freight. High transportation costs within the company's supply chain solutions segment due to capacity constraints is expected to have dampened segmental revenues in the fourth quarter. The Zacks Consensus Estimate for Supply Chain and Freight revenues in the fourth quarter hints at a 3.7% dip from the year-ago reported number.

Costs are high not just in the supply chain solutions segment, but at the U.S. Domestic Package and International Package divisions as well. This, along with escalating fuel costs, might have dented UPS’ bottom line in the fourth quarter.

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 +1.20% as the Most Accurate Estimate is pegged at $3.12, higher than the Zacks Consensus Estimate of $3.09. 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.

Highlights of Q3 Earnings

UPS’ third-quarter 2021 adjusted earnings of $2.71 per share, beat the Zacks Consensus Estimate of $2.52. The bottom line jumped 18.9% year over year with solid performances across all segments. Quarterly revenues of $23,184 million also outperformed the Zacks Consensus Estimate of $22,612.2 million. The top line augmented 9.2% year over year, driven by upbeat demand for e-commerce-related package deliveries.

Other Stocks to Consider

Investors interested in the broader Transportation sector may also consider C.H. Robinson Worldwide (CHRW - Free Report) , Norfolk Southern Corporation (NSC - Free Report) and Landstar System (LSTR - Free Report) , as these stocks too possess the right combination of elements to beat on earnings this reporting cycle.

C.H. Robinson currently has an Earnings ESP of +4.79% and a Zacks Rank #3. The company will report fourth-quarter 2021 results on Feb 2.

Favorable pricing and higher volumes, owing to improved freight market conditions, are expected to have aided C.H. Robinson’s fourth-quarter performance.

Norfolk Southern has an Earnings ESP of +0.16% and a Zacks Rank #3. The company is set to release fourth-quarter results on Jan 26.

Despite supply chain disruptions affecting operations, higher coal volumes are likely to have driven Norfolk Southern’s fourth-quarter performance.

Landstar System has an Earnings ESP of +1.56% and is Zacks #3 Ranked presently. The company will release fourth-quarter 2021 results on Jan 26.

Landstar’s fourth-quarter performance is expected to have benefited from higher truck rates and strong freight demand.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.