United Parcel Service (UPS) delivered a pleasant surprise to investors, reporting its first revenue beat in a decade. The company’s Q3 earnings, released amid an exciting earnings season, showed revenue growth of 5.8% year-on-year, exceeding the $14.4 billion mark. This success was driven by strong volume growth, particularly in the U.S. Domestic segment, and effective cost management initiatives.
Analysts reacted to the news with a mixture of enthusiasm and cautious optimism. Stifel’s Bruce Chan, who maintained a Buy rating, lauded UPS’s outperformance and highlighted the positive impact of their cost control efforts. He also pointed to management’s optimistic outlook for the back half of 2024, predicting a ‘profitability and margin inflection.’
Bank of America Securities’ Ken Hoexter, while retaining a Neutral rating, acknowledged the impressive 12% year-on-year growth in earnings. He attributed this to UPS’s dynamic pricing strategy, cost-cutting initiatives, and increased average daily volume. Hoexter also highlighted the success of the Fit to Serve program, which has already resulted in significant cost savings. However, he noted a revised revenue guidance, largely due to the sale of Coyote Logistics.
Goldman Sachs analyst Jordan Alliger, maintaining a Buy rating, praised UPS’s strong Domestic margin performance, which exceeded expectations. He views the company’s current performance as a positive catalyst for investors, especially considering the challenging market conditions of the past year. Alliger believes that the uncertainty surrounding UPS’s earnings will decrease as manufacturing and B2B segments recover, and the consumer demand environment strengthens.
While the overall outlook for UPS appears positive, analysts are closely monitoring key factors such as the recovery of manufacturing and B2B sectors and the strength of consumer demand. UPS’s ability to navigate these challenges will play a significant role in its future success.
The company’s shares rose 0.3% to $138.75 on Friday, reflecting investor confidence in the company’s recent performance and future prospects.
