Will UPS Stock Rise After Q3 Results?

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UPS: United Parcel Service logo
UPS
United Parcel Service

United Parcel Service (NYSE: UPS) is scheduled to report its Q3 2022 results on Tuesday, October 25. We expect UPS to post revenue and earnings above the street expectations. The big e-commerce surge seen through the lockdown phase of the Covid-19 pandemic is now cooling off, impacting the delivery volumes for logistics companies. However, UPS should benefit from its pricing actions earlier in the year. Not only do we expect the company to navigate well in Q3, but we also find UPS stock to have room for growth, as discussed below. Our interactive dashboard analysis on United Parcel Service Earnings Preview has additional details.

(1) Revenues expected to be above the consensus estimates

  • Trefis estimates UPS’ Q3 2022 revenues to be around $24.5 billion, reflecting mid-single-digit y-o-y growth and slightly higher than the $24.3 billion consensus estimate.
  • Higher price realization should aid the company’s top-line growth. However, the average volume is likely to trend lower.
  • Looking back at Q2 2022, UPS’ total revenues grew 6% y-o-y to $24.8 billion, with growth seen across its segments.
  • A 12% rise in average revenue per piece more than offset a 5% decline in average daily package volume.
  • Our dashboard on United Parcel Service Revenues offers more details.
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(2) EPS also likely to be above the consensus estimates

  • UPS’ Q3 2022 adjusted earnings per share (EPS) is expected to be $2.96 per Trefis analysis, compared to the $2.84 consensus estimate and $2.71 figure the company reported in the prior-year quarter.
  • UPS’ net income of $2.9 billion in Q2 2022 reflected a 21% rise from its $2.4 billion figure in the prior-year quarter.
  • This can be attributed to higher revenues and around 50 bps rise in operating margins.
  • For the full-year 2022, we expect the EPS to be higher at $13.10, compared to $12.13 in 2021.

(3) UPS stock looks like it has room for growth

  • We estimate United Parcel Service’s Valuation to be $220 per share, which is 33% above its current market price of $166.
  • At its current levels, UPS stock is trading under a 13x forward EPS estimate of $13.10 for 2022, compared to the last three-year average of 15x, implying there is more room for growth.
  • Furthermore, if the company reports upbeat results, with sales growth and guidance better than the street estimates, it is likely that the P/E multiple will be revised upward, resulting in even higher levels for UPS stock.
  • UPS stock has been weighed down over the last month or so after its peer, FedEx, reported downbeat Q1 fiscal 2023 results and cut its outlook.

While UPS stock looks like it has room for growth, it is helpful to see how UPS’ Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

Given the higher inflation and rising interest rates, among other factors, UPS stock has seen a 25% fall this year. Can it drop more? See how low UPS stock can go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.

Furthermore, the Covid-19 crisis has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised at how counter-intuitive the stock valuation is for UPS vs. Amerco.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

Returns Oct 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 UPS Return 0% -25% 40%
 S&P 500 Return 2% -23% 64%
 Trefis Multi-Strategy Portfolio 0% -27% 190%

[1] Month-to-date and year-to-date as of 10/21/2022
[2] Cumulative total returns since the end of 2016

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