Will UPS Stock Rebound After Nearly A 10% Fall In A Month?

by Trefis Team
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The stock price of United Parcel Service (NYSE: UPS) has seen a fall of over 9% over the last twenty-one trading days. Much of this decline has come after the company reported its Q2 results on Jul 27. Although the company reported upbeat results in Q2, with both revenue and earnings above ours as well as consensus estimates, the fall in the stock was driven by a decline in ground shipments (4% decline y-o-y), a metric that drove the earnings for UPS since the beginning of the pandemic, as people stayed at home and ordered goods online. But now with over half of the U.S. population fully vaccinated, economies are opening up, and people have started to venture out, impacting the overall ground shipment volume. Investors now fear that if this trend were to continue it may impact the overall earnings growth for UPS.

But now that UPS stock has moved -9.4% over the last month, will it continue its downward trajectory, or is a rise imminent? We believe that the stock will likely see higher levels going forward. UPS, a couple of months back, provided a guidance for 2023, which was in-line with the street estimates. At mid-point of the range, revenues are expected to be $100 billion (vs. $85 Bil in 2020) and adjusted operating income at $13.2 billion in 2023, implying that the company will likely see a steady growth over the coming years. UPS also stated that it will focus on deliveries that provide higher margins over volume, bolstering its overall expected earnings growth.

We continue to believe that UPS stock has some more room for growth from its current levels of around $193. While the concern over falling ground shipments is valid, it was not surprising, and we believe that despite the near term declines, the overall ground shipment volumes are likely to remain higher compared to the pre-pandemic levels. As such, investors can use the recent dips as a buying opportunity for long-term gains.

Furthermore, going by historical performance, there is a good chance of a rise in UPS stock over the next month. Out of 115 instances in the last ten years that UPS stock saw a twenty-one day fall of -9.4% or more, 77 of them resulted in UPS stock rising over the subsequent one-month period (twenty-one trading days). This historical pattern reflects 77 out of 115, or about a 67% chance of a rise in UPS stock over the coming month. See our analysis on UPS Stock Chances of Rise for more details.

Calculation of ‘Event Probability‘ and ‘Chance of Rise‘ using last ten years data

  • After moving -0.4% or more over a five-day period, the stock rose in the next five days on 56% of the occasions.
  • After moving 0.3% or more over a ten-day period, the stock rose in the next ten days on 55% of the occasions
  • After moving -9.4% or more over a twenty-one-day period, the stock rose in the next twenty-one days on 67% of the occasions.

Predict average return on United Parcel Service (UPS) Stock Return: AI Predicts UPS Average and Excess Return After a Fall or Rise

United Parcel Service (UPS) Stock Return (Recent) Comparison With Peers

  • Five-Day Return: UPS highest at -0.4%; XPO lowest at -5.7%
  • Ten-Day Return: UNP highest at 1.5%; AMZN lowest at -4.3%
  • Twenty-One Days Return: UNP highest at 1.9%; XPO lowest at -40%

While UPS stock may see higher levels, 2020 has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for Edison International vs FedEx.

See all Trefis Price Estimates and Download Trefis Data here

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