Shares Of Logistics Giant UPS Surge Nearly 10% To Hit Record High After Q4 Earnings

United Parcel Service (UPS) shares hit a new record high in pre-market trading on Tuesday after the logistics giant reported better-than-expected earnings in the fourth quarter and its revenue estimates for this year topped expectations.

The Atlanta-based company reported quarterly adjusted earnings of $3.59​​ per share, beating the Wall Street consensus estimates of $3.10 per share. The company, which is one of the largest global shipping and logistics companies in the world, said its revenue jumped over 11% to $27.77 billion from a year ago. That too topped the market expectations of $27.06 billion.

UPS expects to deliver its 2023 consolidated revenue and operating margin targets one year early. For the full year 2022, the company expects consolidated revenue of about $102 billion, an adjusted operating margin of approximately 13.7% and adjusted return on invested capital to be above 30%.

The company is planning capital expenditures to be 5.4% of revenue or approximately $5.5 billion, dividend payments to be around $5.2 billion, subject to Board approval, and share repurchases to be at least $1.0 billion. The effective tax rate is expected to be around 23.0%.

United Parcel Service (UPS) stock surged nearly 10% to hit a record high of $221.64 in pre-market trading on Tuesday. The stock fell over 5% so far this year after surging more than 27% in 2021.

Analyst Comments

“UPS reported 4Q21 EPS well above our and consensus estimates. As promised, the Board raised the dividend by 49% to $1.52 / quarter from $1.02 and our estimate of $1.40. The company ended the year with strong volumes and momentum heading into 2022. Full-year revenue of $97.3 billion was a record,” noted Helane Becker, Equity Analyst at Cowen.

“They obviously continue to see strong demand for their services, which we also expect will continue given the ease of ordering online vs going to the store.”

United Parcel Service (UPS) Stock Price Forecast

Seven analysts who offered stock ratings for United Parcel Service (UPS) in the last three months forecast the average price in 12 months of $227.50 with a high forecast of $250.00 and a low forecast of $191.00.

The average price target represents a 12.51% change from the last price of $202.21. Of those seven analysts, four rated “Buy”, three rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $135 with a high of $255 under a bull scenario and $50 under the worst-case scenario. The investment bank gave an “Underweight” rating on the logistics giant’s stock.

“We see competitive secular threats to the Parcel business as a triple threat of (1) Insourcing by eCommerce giants (2) Omnichannel shift enabling last-mile competition from mid-size retailers and (3) Platformization of small-shipper volumes. Together, these trends could erode returns in the B2C space, which has been a huge driver of growth for the legacy parcels in recent years,” noted Ravi Shanker, equity analyst at Morgan Stanley.

“Despite its strong operating metrics, United Parcel Service (UPS) could be more at risk of disruption given its larger B2C business (and AMZN exposure), fewer self-help initiatives than FDX and more expensive valuation.”

Several other analysts have also updated their stock outlook. BofA Global Research cut the price objective to $236 from $244. Credit Suisse started coverage with outperform rating and set the target price at $263. JPMorgan raised the target price to $243 from $240. Baird lifted the target price to $225 from $220.

Technical analysis suggests it is good to buy as 100-day Moving Average and 50-200-day MACD Oscillator signals a strong buying opportunity.

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