Up 17% In A Week, Will UPS Stock Continue Its Rally?
[Updated: Feb 3, 2022] UPS Stock Rise
The stock price of United Parcel Service (NYSE: UPS) has seen a rise of 9% over the last month, while it’s up a solid 17% over the last week. This can be attributed to the company’s strong Q4 results, which were well above ours as well as the consensus estimates. UPS’ revenue of $27.8 billion, reflects an 11.5% y-o-y growth and it is slightly above ours as well as the consensus estimate of $27.7 billion. The company benefited from an increase in e-commerce orders due to the Omicron spread. The international revenue was up 13%, primarily led by strong 16% gains in average revenue per piece. However, the volume declined 5%, in line with the company’s estimates.
Looking at the bottom line, UPS reported earnings of $3.59 on a per share and adjusted basis, reflecting a 35% y-o-y rise, due to higher revenues as well as a 270 bps rise in operating margins, which stood at 14.2%. The $3.59 EPS compares with our forecast of $3.08 and the consensus estimate of $3.09.
Not only did the company post upbeat results, but its outlook for 2022 was also better than the consensus expectations. The company expects revenue of $102 billion and an operating margin of 13.7% (vs. 13.5% in 2021). The revenue forecast is better than the $100 billion consensus estimate and operating margin is expected to expand despite the inflationary environment. Overall, upbeat results and a strong outlook for 2022 boded well with the investors, evident from the appreciation in UPS stock over the last few days.
Now that UPS stock has seen a rise of 9% in a month, will it continue its upward trajectory, or is a fall imminent? Going by historical performance, there is a higher chance of continued gains in UPS stock over the next month. Out of 215 instances in the last ten years that UPS stock saw a twenty-one-day rise of 9% or more, 131 of them resulted in UPS stock rising over the subsequent one-month period (twenty-one trading days). This historical pattern reflects 131 out of 215, or about a 61% chance of a rise in UPS stock over the coming month, implying that UPS stock is a good bet even after its recent rally, in our view. See our analysis on United Parcel Service Stock Chance of A Rise for more details.
Calculation of ‘Event Probability‘ and ‘Chance of Rise‘ using last ten years data
- After moving 16.6% or lower over a five-day period, the stock rose in the next five days on 83% of the occasions.
- After moving 13.9% or more over a ten-day period, the stock rose in the next ten days on 50% of the occasions
- After moving 8.7% or more over a twenty-one-day period, the stock rose in the next twenty-one days on 61% of the occasions.
This pattern suggests that UPS stock has an equal chance of a rise or a fall in the next ten days, while it has a higher chance of a rise in the next five days as well as next one month.
United Parcel Service (UPS) Stock Return (Recent) Comparison With Peers
- Five-Day Return: UPS highest at 16.6%; CHRW lowest at -9.8%
- Ten-Day Return: UPS highest at 13.9%; CHRW lowest at -13.9%
- Twenty-One Day Return: UPS highest at 8.7%; CHRW lowest at -14.2%
[Updated: Jan 27, 2022] UPS Q4 Earnings Preview
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 is 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.
(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.
While UPS stock is likely to move higher in the near term, several peers in its sector look like a better bet than UPS. Check out how UPS Peers fare on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.
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|S&P 500 Return||2%||-4%||105%|
|Trefis MS Portfolio Return||1%||-9%||260%|
 Month-to-date and year-to-date as of 2/3/2022
 Cumulative total returns since the end of 2016