UPS Earnings Preview: Q2 results now a proxy for US economy

  • UPS releases Q2 earnings before the US market opens on Tuesday.
  • Wall Street expects adjusted EPS of $3.16.
  • The analyst community is fairly split on UPS stock prospects.

United Parcel Service (UPS) stock fell slightly afterhours on Monday after Walmart (WMT) revised its guidance for the current reporting quarter lower. As a proxy like Walmart for the overall US economy but also for consumer spending, UPS has a lot to lose in the face of a possible recession. Walmart said higher costs due to inflation are already having an effect on consumers by prodding them to reduce spending. Reduced spending could likely also affect the number of e-commerce deliveries for UPS in the current quarter. 

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UPS earnings forecast

UPS earnings Wall Street forecasts average out at adjusted earnings per share (EPS) of $3.16 on revenue of $24.59 billion, which is still quite positive. It would mean 3% growth in adjusted EPS YoY and 5% growth in revenue over the period. This is treated as good, because companies that benefit from e-commerce saw their revenue soar during the pandemic, so a slowdown in growth is expected. As long as it is negative growth, the market should respond positively.

During the past three months, 12 analysts have revised the quarter’s EPS estimates up, while six have lowered their outlook

Wolfe Research downgraded UPS to the equivalent of a Sell rating due to what it called “a mix of earnings and valuation risk.” UPS is valued at just under 15 times forward earnings and 1.6 times forward sales, which appears to be in line with peers.

Evercore ISI was much more upbeat when it began coverage on UPS in early July. “The stock has been a relative in-line performer with the broader transport landscape over the last 3 months (better than rails and the broader market, worse than trucking/FDX), so it doesn’t feel like there’s much controversy heading into the print,” wrote Evercore analyst Jonathan Chappell.

UPS’s average price target is $216, which is a 15% premium to the current share price near $188.

UPS stock forecast

UPS stock has already surpassed the range high from the second week in June at $188.88, though it has since fallen back below $188. Shares are now within a supply zone that has acted as resistance since the first half of April. The zone goes from $187 to $194. A move past this region would allow UPS to the psychological level of $200, but there is no certainty this zone can be conquered in short order.

UPS share price has support at or near both $170 and $180. A positive sign for bulls is that the weekly chart’s Moving Average Convergence Divergence (MACD) has crossed over in recent weeks.

UPS weekly chart

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