UPS Shares Fall on Weak Revenue Despite Strong Profits: 3 Things UPS Investors Need to See

The United Parcel Service Inc. (UPS) delivered its first quarter earnings yesterday in which the top line fell short of expectations despite beating the bottom line consensus. The stock had been rallying leading into the news but has fallen around 3% so far today.

Revenue fell to $21.71 billion, representing a 5.3% drop year over year. This came in below the  $21.84 billion analysts were expecting and also represented the 6th consecutive quarter in which the company fell short of the FactSet consensus on the top line.

The company says it experienced a 7.5% decline in its average daily volume of packages delivered in the US to start the quarter out. This improved as the quarter progressed but UPS was fighting an uphill battle to catch up at that point.

Nevertheless, the courier did deliver on the bottom line. The adjusted earnings per share came in at $1.43, well ahead of the $1.28 analysts expected. This was the 16th adjusted earnings beat in a row for the company.

Although UPS outperformed on an adjusted basis, its net income did fall a bit year over year at $1.11 billion compared to $1.9 billion in 2023. Operating profit took a hit as well, down 36.5% as costs climbed amidst a new contract with Teamsters Union. This resulted in higher employee wages, repairs/maintenance, and fuel costs.

While revenue is down, there’s a lift coming in the form of the UPS and USPS air cargo partnership that was struck at the start of this month. CEO Carol Tomé also believes this deal will give profits a boost.

That said, the company reaffirmed its full-year outlook for revenue between $92 billion to $94.5 billion, with the FactSet consensus situated right in the middle of that range at $93.05 billion.

So, where does all this leave current or prospective investors? We’ve found 3 things you need to see in the VectorVest stock analysis software to help you determine whether you should buy, sell, or hold off on this stock right now.

UPS Has Fair Upside Potential, Safety, and Timing

VectorVest is a proprietary stock rating system designed to streamline your decision-making process and save you time and stress, all while empowering you to win more trades. 

You’re given all the insight you need in 3 ratings: relative value (RV), relative safety (RS), and relative timing (RT). Each sits on its own scale of 0.00-2.00 with 1.00 being the average. This makes interpretation quick and easy.

The system even issues a clear buy, sell, or hold recommendation based on the overall VST rating for any given stock at any given time. That being said, here’s what we uncovered for UPS:

• Fair Upside Potential: The RV rating compares a stock’s long-term price appreciation potential (forecasted 3 years out), AAA corporate bond rates, and risk. This dynamic indicator offers far better insight than the typical comparison of price to value alone. UPS has a fair RV rating of 0.85, albeit a ways below the average. The stock is overvalued with a current value of just $110.55.
• Fair Safety: The RS rating is a risk indicator computed through an analysis of the company’s financial consistency & predictability, debt-to-equity ratio, business longevity, sales volume, price volatility, and other factors. UPS has a fair RS rating too at 0.93.
• Fair Timing: The RT rating is based on the direction, dynamics, and magnitude of the stock’s price movement. It’s calculated day over day, week over week, quarter over quarter, and year over year. UPS has a fair RT rating of 0.92 as well.

The overall VST rating of 0.90 is fair for UPS and leaves current or prospective investors in limbo with a HOLD recommendation in the VectorVest system. Still, we encourage you to take a deeper look at this situation by getting your own stock analysis free today!

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VectorVest advocates buying safe, undervalued stocks, rising in price. UPS delivered solid profitability for the first quarter despite falling short of expectations on a revenue basis, but it expects the recent USPS partnership to give the business a lift. The stock itself has fair upside potential, safety, and timing right now.

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