UPS Q4 Earnings Preview: Holiday Season To Drive Growth

January 30th, 2017 by Trefis Team
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UPS: United Parcel Service logo
UPS
United Parcel Service

Logistics giant UPS (NYSE:UPS) is slated to announce its fourth quarter and full year earnings on January 31st. In the third quarter of the current fiscal year, the company recorded 5% growth in its top line, driven by growth in shipments volumes, both domestically and internationally. This growth in the top line, coupled with reduced fuel costs and the company’s ORION program, resulted in its bottom line improving a marginal 1% over the prior year quarter, with net income reported at $1.27 billion for the quarter. The company also reaffirmed its full year earnings per share guidance of $5.70 to $5.90.

In the upcoming results for the quarter ended December 31st, UPS is expected to report revenues of $17 billion according to consensus estimates, implying growth of 6% over the same period last year. On the EPS front, the company is expected to generate EPS of $1.69 for the fourth quarter, which would imply growth of almost 8% over Q3 FY’15, and EPS of $5.82 for the full year, which would imply growth of almost 9% over the last fiscal year.

Screen Shot 2017-01-27 at 14.55.35

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The holiday season is the most important period for UPS since it drives the seasonally strong fourth quarter. With consumer spending in the holiday season increasing 4% over the prior year, we expect the trend to continue. Moreover, the company has undertaken a slew of measures, which would help it keep pace with the rapidly growing e-commerce industry. In the first nine months of the current fiscal year, UPS’s capital expenditures increased 11% over the prior year period to $1.8 billion. Also, the company planned to automate its existing facilities in California, Colorado, Illinois, Chicago, Los Angeles and Texas, which could improve its productivity 20-30%. Moreover, the company announced its plans to procure 14 new Boeing 747-8 jumbo freighters along with options to buy 14 more in the future.

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