United Parcel Service (NYSE: UPS) saw a return to volume growth in the quarter, but higher-than-expected expenses weighed on results.
Shares of UPS traded down 12% as of 10 a.m. ET after the company reported a top- and bottom-line miss.
Volumes, and costs, are heading higher
It has been a tough 18 months for transportation companies. A surge in shipping after the height of the pandemic gave way to uncertainty about the health of the economy, causing large corporate customers to cut back on inventories and softening shipping demand and pricing.
The second quarter could have marked a turning point. UPS reported volume growth in the United States for the first time in nine quarters. But higher expenses due in part to a new labor deal UPS signed last year as well as a one-time charge to settle a regulatory matter conspired to drive earnings below consensus.
UPS earned $1.79 per share in the quarter on sales of $21.8 billion, missing Wall Street’s estimate for $1.99 per share on sales of $22.2 billion. The company also revised its full-year revenue forecast to about $93 billion, from previous guidance of between $92 billion and $94.5 billion in sales.
“As expected, our operating profit declined in the first half of 2024 from what we reported last year,” CEO Carol Tomé said in a statement. “Going forward we expect to return to operating profit growth.”
Is UPS a buy?
UPS has a lot of moving parts right now. In addition to its internal effort to rightsize operations and improve efficiency, the company has a deal to sell its Coyote Logistics business to RXO Logistics and a separate agreement to acquire Mexican express delivery operator Estafeta.
The company also announced it was restarting its share-repurchase program, targeting $1 billion in buybacks annually.
UPS is a proven operator that plays a vital role in global supply chains and will likely have ample opportunity to perform in the years to come. But given the near-term headwinds, and the continued economic uncertainty, there is no need for investors to rush in here and buy the dip.
Should you invest $1,000 in United Parcel Service right now?
Before you buy stock in United Parcel Service, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and United Parcel Service wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $757,001!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
See the 10 stocks »
*Stock Advisor returns as of July 22, 2024
Lou Whiteman has positions in RXO. The Motley Fool has positions in and recommends RXO. The Motley Fool recommends United Parcel Service. The Motley Fool has a disclosure policy.
Why UPS Stock Is Failing to Deliver Today was originally published by The Motley Fool
Credit: Source link
