What To Expect From UPS’s Q4 Earnings

by Trefis Team
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UPS (NYSE:UPS) posted a rather mixed earnings in the previous quarter. While both earnings and revenues beat the consensus, results were hurt on adverse weather conditions that hurt operations across much of the east coast. That said, things seem to be looking up for the company in Q4. The company recorded their most successful holiday quarter. This is definitely going to add upside on the top line. However, we can expect the company’s bottom line to be hurt by higher-than-usual costs. High package delivery costs have plagued the company for some time now, and we can expect this to continue into Q4 as well.

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  • In the recent past, e-commerce has grown at a significant rate. According to the National Retail Federation, e-commerce grew by around 8-12% last year, which is more than double the overall increase for all retail. This, as expected, translated to notably higher shipments through the holiday season. In this respect, revenues from the company’s U.S. Domestic Package unit are expected to see a significant increase. Analysts estimate sales at the division to come in around $11,578 million, notably higher than $9,649 million in Q4 2016.

  • Further, the company’s international package division is expected to benefit from a high growth in export volumes across the globe on the back of a robust holiday season. According to analysts, we can expect the division to post revenues to the tune of about $3,607 million.

  • In addition to core pricing gains, driven by general inflation, increase in operating costs and improved demand conditions, the company’s revenue per package will get an additional boost from higher fuel surcharge revenues. Crude oil prices have averaged considerably higher this year, which has translated into higher fuel prices, and hence, higher fuel surcharge revenues.
  • As mentioned above, the company will see its margins contract in the quarter on continually increasing package delivery costs.

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