UPS Beats 4Q Revenue Estimates; Shares Jump 4.2%

UPS shares gained 4.2% in US morning trading as the logistics giant outperformed quarterly earnings driven by pandemic-led by demand for delivery services.

In the fourth quarter, UPS (UPS) reported adjusted earnings of $2.66 per share, beating analysts’ estimates of $2.14 per share. Revenues rose 21% year-on-year and came in at $24.9 billion, exceeding consensus estimates of $22.8 billion.

The company said that revenue was fueled by growth across all of its business segments. In FY20, sales grew 14.2% year-on-year to $84.6 billion. Adjusted diluted earnings rose to $8.23 per share versus $7.53 in FY19. This marked a record for the company’s revenues and adjusted diluted EPS.

UPS CEO Carol Tomé said, “Our financial performance in the fourth quarter exceeded our expectations, and I thank all UPSers for their extraordinary efforts to deliver industry-leading service through the holidays. As we look past 2020 into the new year, we are optimistic. During the fourth quarter, we began transporting COVID-19 vaccines.”

For FY21, UPS expects capital spending of about $4 billion and growth in dividends subject to Board approval. The company plans to re-pay long-term debt maturities of $2.5 billion when they come due in FY21. For now, it has no plans to initiate a share repurchase program or raise new debt in FY21. The company did not provide 2021 guidance due to the economic uncertainty. (See UPS stock analysis on TipRanks)

Last week, Robert W. Baird analyst Garrett Holland reiterated a Hold rating on the stock and a price target of $178. Holland said in a note to investors that while investors had moderated their expectations before the earnings release, still the market will continue to focus on the company’s detailed plans for cost savings, operating margins, and ROIC (Return on invested capital) potential.

The rest of the Street is cautiously optimistic about the stock with a Moderate Buy consensus rating. That’s based on 3 analysts recommending a Buy, 2 analysts suggesting a Hold, and 1 analyst has a Sell. The average analyst price target of $182.17 implies 16.6% upside potential to current levels.

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