United Parcel Service (NYSE: UPS) is scheduled to report its Q4 2022 results on Tuesday, January 31. We expect UPS stock to trade higher, with its revenue and earnings falling marginally 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. Not only do we expect the company to navigate well in Q4, but we also find UPS stock to have some room for growth, as discussed below. Our interactive dashboard analysis on United Parcel Service Earnings Preview has additional details.
(1) Revenues expected to be marginally above the consensus estimates
- Trefis estimates UPS’ Q4 2022 revenues to be around $28.3 billion, reflecting a low single-digit y-o-y growth and slightly higher than the $28.0 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 Q3 2022, UPS’ total revenues grew 4% y-o-y to $24.2 billion, with growth seen for its U.S. Domestic and International segments.
- A 9% rise in average revenue per piece more than offset a 2% decline in average daily package volume.
- Our dashboard on United Parcel Service Revenues offers more details.
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(2) EPS to be in line with the consensus estimates
- UPS’ Q4 2022 adjusted earnings per share (EPS) is expected to be $3.60 per Trefis analysis, just a cent above the $3.59 consensus estimate and $3.59 figure the company reported in the prior-year quarter.
- UPS’ net income of $2.6 billion in Q3 2022 reflected a 10% rise from its $2.4 billion figure in the prior-year quarter.
- This can be attributed to higher revenues and around 22 bps rise in operating margins.
- For the full-year 2023, we expect the EPS to be lower at $12.80, compared to an estimated $12.93 in 2022.
(3) UPS stock looks like it has room for growth
- We estimate United Parcel Service’s Valuation to be $200 per share, which is 11% above its current market price of $180.
- At its current levels, UPS stock is trading under a 14x forward EPS estimate of $12.80 for 2023, compared to the last three-year average of 15x, implying more room for growth.
- Furthermore, if the company reports upbeat results and provides 2023 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.
Given the higher inflation and rising interest rates, among other factors, UPS stock has seen an 11% fall in the last twelve months. 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.
|S&P 500 Return||5%||5%||79%|
|Trefis Multi-Strategy Portfolio||9%||9%||242%|
 Month-to-date and year-to-date as of 1/25/2023
 Cumulative total returns since the end of 2016