It is no exaggeration to say that Wall Street's reaction was lukewarm. UPS' (NYSE:UPS) First quarter earnings report. On the positive side, five of those companies raised their price targets (BMO Capital raised its price target to $169). Still, only one company has a positive rating on the stock (Oppenheimer's Outperform rating). The rest remained in the “hold/neutral/market performance” category.
UPS had a mixed first quarter.
The lack of enthusiasm is understandable. UPS beat expectations after Chief Financial Officer Brian Newman led the market lower during an investor presentation in late March, just days before the end of the quarter. He told investors he expects adjusted operating profit to decline 40% from a year ago. I have previously discussed how such results cast serious doubts on the full-year outlook.
However, UPS reported a decline in adjusted operating profit of only 31.5% for the quarter, with a “beat” due to improved shipping volumes in the second half of the quarter and a shift of some costs from March to April. was there.
So it's hard to get excited about the earnings report, since the final adjusted operating profit number is what the market was pricing in before Newman's Investor Day update.
better second half
That said, management reiterated its full-year outlook and three-year financial targets. Furthermore, UPS's consolidated average daily sales volume declined by only 3.2% year-on-year in the first quarter, after an annual decline of 7.5% in the fourth quarter, with the impact expected to be felt in 2024. It is considered. Meanwhile, UPS will be catching up on cost increases from last year. The annual Teamsters contract and fuel surcharge should increase revenue per unit.
Continued development of relationships with small and medium-sized businesses (SMBs) and healthcare customers should help the company increase sales, while planned investments in technology will help consolidate locations and improve productivity. right.
All points to UPS's best days ahead. Still, the industry will need to navigate an uncertain production environment as it looks to absorb excess capacity built during the pandemic boom. The stock is attractive on balance, but investors should keep an eye on UPS's shipping volume.
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Lee Samaha has no position in any stocks mentioned. The Motley Fool recommends United Parcel Service. The Motley Fool has a disclosure policy.
Will UPS stock price reach $169? 1 “Wall Street Analysts Think So” was originally published by The Motley Fool
