A month has gone by since the last earnings report for United Parcel Service, Inc. (UPS - Free Report) . Shares have added about 2.1% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is UPS due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
First Quarter Results
UPS reported first-quarter 2018 earnings of $1.55, beating the Zacks Consensus Estimate of $1.54 per share. The bottom line also increased 17.4% on a year-over-year basis. Results were aided by strong performances from the International and Supply Chain and Freight segments.
Revenues improved 10% to $17,113 million from the year-ago quarter, outpacing the Zacks Consensus Estimate of $16,443.6 million. This upside was driven by strong demand for UPS solutions.
U.S. Domestic Package revenues climbed 7.2% year over year to $10,227 million in the first quarter, owing to improved revenues across all products. On the contrary, segmental operating profit (adjusted) declined 20.4% to $756 million due to rough weather conditions among other factors.
Segmental average daily package volumes expanded 4.6%, backed by a 4.1%, 9.3% and 4.3% rise in Ground products, Next Day Air services and Deferred Air products, respectively. Average revenue per piece for the segment was up 2.6%.
International Package revenues improved 15% to $3,533 million. Daily export volumes rose 12% in the quarter under review on the back of premium products outpacing non-premium products. Segmental operating profit increased 15% to $594 million as well.
Supply Chain and Freight revenues grew 16% to $3,353 million. Operating profits in the segment increased 14% to $170 million in the first quarter. Segmental results were boosted by impressive revenue-quality initiatives, growth strategies as well as structural cost reductions.
In the first quarter, the company’s capital expenditure was $1.5 billion. Also, UPS distributed approximately $840 million to shareholders.
The company expects adjusted earnings per share for the current year in the range of $7.03-$7.37, unchanged from its previous expectation. Free cash flow is anticipated between $4.5 billion and $5 billion.
Meanwhile, the effective tax rate is projected at 23-24% for the remainder of the year. Also, the company’s capex is likely to be in the band of $6.5-$7.0 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been seven revisions higher for the current quarter
At this time, UPS has a strong Growth Score of A, though it is lagging a lot on the momentum front with a D. The stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for growth investors than value investors.
Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. Notably, UPS has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.