What’s United Parcel Service’s (UPS) Fair Stock Price Estimate Based On Expected 2019 Earnings?

by Trefis Team
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United Parcel Service’s (NYSE:UPS) fair price estimate based on expected 2019 earnings is $124, according to Trefis estimates. UPS is primarily involved in delivery of packages worldwide. Its services are used by retail customers and businesses to deliver packages across 220 countries. UPS’ end users include retail consumers and businesses across the globe. The company competes with other transportation companies, including FedEx Corporation and DHL. We have a price estimate of $124 for UPS’ stock, which we discuss in this note. You can look at our interactive dashboard analysis ~ United Parcel Services Valuation: Expensive Or Cheap? ~ for more details.

We Can Break Down UPS’ Stock Price Estimate Into 4 Factors: 1. Total Revenue, 2. Net Income Margin, 3. No. of Shares, And 4. P/E Multiple

#1. UPS’ Total Revenues Could Grow In Mid-Single-Digits In 2019. Look At Our Interactive Dashboard Analysis ~ UPS Revenues: How Does United Parcel Services Make Money? ~ For A More In Depth View On The Company’s Revenues.

#2. UPS’ Adjusted Net Income Grew From $4.4 Billion In 2014 To $6.3 Billion In 2018, And It Will Likely Be Around $6.5 Billion In 2019, Led By Stable Margins And Higher Revenues. The Jump In Adjusted Net Income Margin In 2018 Can Be Attributed To Pension Mark To Market Loss of $1.6 Billion, Which Doubled From The Prior Year.

#3. UPS’ Adjusted EPS Has Grown From $4.75 In 2014 To $7.24 In 2018, And It Is Estimated To Be $7.51 In 2019, In Line With The Company’s Guidance. The Growth From 2018 Can Be Attributed To Higher Adjusted Net Income And Lower No. of Shares. The Company Has Year-To-Date Repurchased 7 Million Shares Under Its Share Buyback Program.

#4. Our Price Estimate of $124 For UPS’ Stock Is Based on a 16.6x Multiple Based On Expected 2019 Adjusted Earnings, And Adjusted Earnings of $7.51 Per Share, Which Is In Line With The Average Consensus.

Comparing UPS’ Historical P/E With That of FedEx

  • UPS’ P/E multiple based on price at the end of Q3, and expected forward earnings for the full year, declined from 18.2x in 2015 to 15.8x in 2019.
  • This compares with FedEx, which saw its multiple decline from 13.4x to 10.7x during the same period.
  • The reason for lower multiple for FedEx can be attributed to its recent quarter earnings, which were below street estimates, and the company cut its guidance for fiscal 2020, amid trade tensions.
  • Look at our interactive dashboard analysis ~ FDX Valuation: How Does FedEx Corporation’s Valuation Compare To Its Peers? ~ for more details on valuation.

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