United Parcel Service ( NYSE: UPS ) is due to post its Q4 results prior to the bell on Tuesday with all eyes on macro impacts on the business and guidance for 2023.
Analysts anticipate the company will post $3.59 in earnings per share on $28.03B in revenue, estimates that have been reeled in a number of times in the weeks ahead of the report. The transportation giant has beaten EPS estimates in 8 consecutive quarters, missing revenue expectations only once in that span.
Much of the market has rebounded sharply in recent months, with the S&P rising over 12% since the start of the fourth calendar quarter of 2022. However, both FedEx Corporation ( FDX ) and United Parcel Service ( UPS ) have made more modest moves amid macro concerns, labor negotiations, and negative sentiment weighing on shares.
That said, analysts are beginning to turn more positive on the name, with the upcoming earnings release serving as a potential catalyst.
“We get that near term is choppy, but history tells us it's about time to own transport complex,” Raymond James analyst Patrick Brown told clients ahead of the print. “Using history as
a roadmap, the transport complex usually begins to “work” 1-4 months before industrial production turns negative (think y/y change). Given that our simple sequential analysis indicates IP will likely turn negative y/y in February, we actually believe NOW is the time for investors to start warming to the overall transport complex despite numbers that continue to trickle down!”
He maintained a “Strong Buy” rating on the stock, aided not only by overly bearish sentiment that places a floor under the stock, but increasing e-commerce tailwinds.
Keybanc analyst Todd Fowler largely agreed, writing in a preview note that the market already understands the macro pressures bearing down on the transport sector. While these impacts are expected to hamper EPS performance for the full year, Fowler reiterated his Buy-equivalent rating based upon positive productivity improvements and pricing actions to protect margins.
That said, Citi analyst Christian Wetherbee warned that ongoing negotiations with the Teamsters Union looms large over 2023.
“The biggest hurdle to sentiment (and possibly fundamentals) remains the Teamster negotiation. As we approach late-Spring, this overhang may weigh on stock performance,” he wrote in a note on Monday. “Short-term, we believe sentiment is negative and results/guidance is likely to be good enough to support shares. However, big follow through will be challenging as the looming union negotiation may offset attractive valuation.”
The analyst consensus on the stock remains a Buy , though Seeking Alpha’s Quant Team has remained a Hold since early 2022 .
For further details see:
UPS earnings preview: Is pessimism priced in?