United Parcel Service (NYSE:UPS) is scheduled to report its Q4 2021 results on Tuesday, February 1. We expect UPS to likely post revenue and earnings in-line with the street expectations. The overall ground delivery volume is likely to benefit from the rise of Covid-19 cases in December. An overall rebound in economic activities likely boded well for the company’s supply chain as well as international businesses in Q4. The company’s operating margins are also expected to expand in Q4. Overall, we expect the company to navigate well over the latest quarter. Furthermore, our forecast indicates that UPS stock is undervalued currently and it will likely see higher levels going forward, in our view. Our interactive dashboard analysis on United Parcel Service Earnings Preview has additional details.
(1) Revenues expected to be in-line with the consensus estimates
- Trefis estimates UPS’ Q4 2021 revenues to be around $27.1 billion, in-line with the consensus estimate.
- The gradual opening up of economies and vaccination programs in the U.S. has resulted in a pickup in economic activities, and this should bode well for the overall deliveries.
- E-commerce growth remains the important driver for UPS’ near term growth, and this will likely be visible in terms of higher revenues for the company’s U.S. Domestic Package segment in Q4.
- Looking back at Q3 2021, UPS’ total revenues grew 9% y-o-y to $23.2 billion, with growth seen across its segments. Our dashboard on United Parcel Service Revenues offers more details on the company’s business segments.
(2) EPS also likely to be in-line with the consensus estimates
- UPS’ Q4 2021 adjusted earnings per share (EPS) is expected to be $3.08 per Trefis analysis, just a cent below the consensus estimate of $3.09.
- UPS’ net income of $2.4 billion in Q3 2021 reflected a 20% rise from its $2.0 billion figure in the prior-year quarter.
- This can be attributed to higher revenues and improved margins, a trend that likely continued in Q4 as well.
- While there are concerns over higher inflation, UPS’ management in its last quarterly earnings conference call stated that it expects to see operating margin expansion in Q4.
- The company raised its prices by an average of 5,9% in 2022, implying that it was able to pass-on some of the increased costs to the end customer.
- Looking forward, for the full-year 2022, we expect the EPS to be $12.38, compared to $8.23 in 2020. and an estimated $11.62 in 2021.
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(3) More room for growth in UPS stock
- We estimate United Parcel Service’s Valuation to be $238 per share, which is 20% above its current market price of $199.
- This represents forward P/EBITDA of 16.6 and expected United Parcel Service EBITDA growth of 10.9% over 2021.
- That said, if the company reports upbeat results, with sales growth as well as 2022 guidance better than the street estimates, it is likely that the P/EBITDA multiple will be revised upward, resulting in even higher levels for UPS stock.
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|S&P 500 Return||-9%||-9%||94%|
|Trefis MS Portfolio Return||-14%||-14%||243%|
 Month-to-date and year-to-date as of 1/27/2022
 Cumulative total returns since the end of 2016