A Closer Look at United Parcel Service’s Second-Quarter Earnings

by Warren Seah

Investors eagerly anticipate United Parcel Service’s (UPS) second-quarter earnings report, slated to be released on Tuesday morning. Cost analysis and the state of the economy take the center stage in this report, as UPS recently inked a new five-year labor deal with the Teamsters union. Under the agreement, wages are expected to rise by approximately 6% per year. Investors will be keen to learn about any productivity enhancements negotiated in the contract and how it will impact profit margins in the coming years.

Wall Street’s earnings projections have not experienced significant changes based on the labor deal. The current forecast for 2024 stands at $11.64 per share, a marginal decrease of less than 1% from the previous estimation of $11.71 per share. Analysts are likely waiting for further input from UPS before making substantial adjustments.

According to FactSet, Wall Street expects second-quarter earnings per share of $2.49 on sales amounting to $23 billion. In contrast, UPS reported EPS of $3.29 from sales worth $24.7 billion during the same period last year.

The decline in sales and earnings can be attributed to a sluggish economy. CFO Brian Newman highlighted the challenging macro environment in both commercial and consumer sectors during the company’s first-quarter earnings conference call in April. Furthermore, UPS experienced a 5.4% year-on-year drop in average daily package volume, slightly worse than initial expectations.

The weakening economy has taken a toll on UPS stock, with shares sliding approximately 7% since the first-quarter report. In contrast, the S&P 500 has surged by around 9% during the same period. UPS stock plummeted by about 10% on the day of the report but has since rebounded approximately $6 from its initial dip.

On Monday, UPS stock closed at $182.13, recording a 0.7% increase. The S&P 500 and Dow Jones Industrial Average observed gains of 0.8% and 1.2%, respectively.

Management has scheduled a conference call at 8:30 a.m. Eastern time to discuss the results.

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