Logistics and transportation giant United Parcel Service, Inc. (UPS – Free Report) has not been having the best time. In fact, at the beginning of the year, the company announced a plan to lay off 12,000 employees after a particularly difficult 2023.
This multinational shipping and receiving and supply chain management company, founded in 1907, has expanded to become one of the world’s largest shipping couriers. However, shipping demand has recently decreased as people have been on an in-store holiday shopping spree post-pandemic. Inflation has also not helped.
UPS had, earlier, reduced flights from China as air freight faced a demand slack. With the Chinese economy currently on a path of a rebound and demand increasing gradually, this scenario must change too.
The share price of this Zacks Rank #3 (Hold) company, which is part of the Zacks Transportation – Air Freight and Cargoindustry, has fallen 11.7% as of Nov. 1. FedEx Corporation (FDX – Free Report) and GXO Logistics, Inc. (GXO – Free Report) are two of its peers from the same industry. FedEx and GXO are also ranked #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
UPS’ expected earnings growth rate for the current year maybe languishing at -14.9%, but for next year things are looking up at an estimated increase of 17.7%. The Zacks Consensus Estimate for its current-year earnings has improved 0.5% over the past 60 days. UPS has a VGM Score of B.
UPS reported third-quarter 2024 earnings of $1.76 per share, which beat the Zacks Consensus Estimate of $1.65 and improved 12.1% year over year. However, while revenues of $22.25 billion fell short of the Zacks Consensus Estimate of $22.26 billion, they increased 5.6% year over year. Consolidated operating profit was $2.0 billion, up 47.8% from the third quarter of 2023 and up 22.8% on a non-GAAP adjusted basis.
These numbers signify that the company’s prospects are much brighter for the coming months. In fact, in July, UPS announced that it had entered into an agreement to acquire Mexican logistics company Estafeta Mexicana.
It is also clear that the company has managed to control costs in the last quarter and is looking to salvage the year by bringing targets down.
The transportation industry is also a significant contributor to environmental damage by being responsible for just over a third of global carbon dioxide emissions. UPS scores a fair few points in being one of the pioneering transport companies that have pledged to reduce such carbon emissions and has targets in place that are tracked on a regular basis. For example, by 2025, UPS pledges to have 25% renewable electricity powering its facilities, and had already achieved 8% by 2022. The company has also planted close to 30 million trees since 2012. This makes it a business not only for the present, but also for the future, attracting younger investors.
It will thus be prudent to keep a watch on United Parcel Service, which is probably undervalued at around $134, and is likely to be boosted further with the interest rates coming down and discretionary purchases rising. Also, the holiday season is just around the corner.
