UPS Stock Dives As Key Metrics Signal Boom Is Fading; Analyst Flags ‘Biggest Risk’

UPS (UPS) beat second-quarter earnings forecasts Tuesday, but shipping volume fell while management sees slower growth. UPS stock fell sharply.


The report comes amid severe supply-chain disruptions around the world, due in part to the rebounding global economy. Both UPS and FedEx (FDX) have hiked surcharges in recent months but have also struggled to make deliveries on time.

UPS Earnings

Estimates: Analysts polled by FactSet saw UPS earnings per share climbing 32% year over year to $2.81. They expected sales to rise 13% to $23.19 billion.

Results: UPS earnings rose to $3.06 a share with revenue up 14.5% to $23.42 billion. U.S. domestic revenue rose 10.2%, slightly below some forecasts. Average daily shipping volume fell 0.8% globally and 2.9% in the U.S.

Business-to-business shipments jumped 25.7%, while residential shipments fell 15.8%.

UPS sees an operating margin of 12.7% going forward vs. 14% in Q2. For the rest of the year, UPS sees sales growth slowing to 5.4% overall and 8.2% in the U.S. vs. first half gains of 20% and 16%, respectively.

As Covid’s Delta variant spreads quickly, folks may once again retreat indoors to online shopping and home delivery. Meanwhile, UPS has also become a leader in vaccine and supplies deliveries. In a June 9 investor day event, the company predicted its healthcare unit to grow at a 12.3% compound annual growth rate to $10 billion in revenue by 2023.

But Third Bridge analyst Patrick Donnelly warned in a note Tuesday of the growing threat that Amazon (AMZN), a key UPS customer but also a growing rival, poses.

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“The biggest risk for the company moving forward will be the continued competitive pressure by Amazon Fulfillment. As a customer and competitor, Amazon is able to cherry pick the most attractive parcels for final mile delivery while leaving UPS with the remaining volume.”

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UPS Stock

Shares sold off 7% to 195.19 on the stock market today, those that was off lows. UPS stock had been working on a 219.69 buy point from a flat base, according to MarketSmith chart analysis. An early entry just above the short-term high is at 215.03.

Its relative strength line is plummeting, but after hitting a multiyear high in May. UPS stock has an RS Rating of 83 out of a possible 99. Its EPS Rating is 88.

FedEx stock declined 5% to 282.47 as it eyes a flat-base buy point of 320. The RS line for FDX stock has lagged over the past nine months. Last month, FedEx suspended about 1,400 Freight shipping customers in a shock move aimed to ease network congestion, the Wall Street Journal said.

Also in June, FedEx reported fiscal Q4 earnings roughly in line with analyst views, while revenue growth accelerated further.

Amazon stock lost 2% Tuesday ahead of its quarterly earnings report on Thursday.

Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.


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