On Thursday, Evercore ISI maintained its In Line rating and $141.00 price target for UPS (NYSE:UPS), following the company's third-quarter results which surpassed analysts' expectations. UPS reported an adjusted earnings per share (EPS) of $1.76, exceeding Evercore ISI's prediction of $1.58 and the average forecast of $1.63. The better-than-expected performance was largely attributed to effective cost management in the U.S. Domestic segment, which saw a 4.1% year-over-year reduction in cost per piece.
The delivery company's cost reduction and productivity initiatives, namely Fit to Serve and Network of the Future, played a significant role in these results. Additionally, UPS's focus on revenue quality and the implementation of surcharges contributed to improved yields, especially within the International segment. UPS has updated its full-year 2024 guidance, now expecting $91.1 million in revenue and an adjusted consolidated margin of 9.6%, which marks a 20 basis point increase from its previous guidance.
Despite the positive results, UPS management has indicated challenges such as a shorter peak delivery period and moderated peak shipment expectations from shippers. International demand remains inconsistent, with the European market still facing difficulties. UPS also anticipates an increase in total other expenses by $40 million in the fourth quarter due to higher interest costs and decreased investment income.
As a result of these factors, Evercore ISI has slightly adjusted its fourth-quarter 2024 EPS estimate for UPS downwards by one cent to $2.56. Looking ahead to the next year, despite increasing margin targets for the Domestic and International segments due to ongoing productivity improvements, the forecasted increase in EPS is modest, rising only by $0.03 to $8.84. The price target for UPS shares remains unchanged at $141, with the In Line rating reaffirmed by Evercore ISI.
In other recent news, United Parcel Service (NYSE:UPS) has surpassed Wall Street's profit expectations with a 6.5% growth in domestic volumes. The company reported an adjusted operating margin of 8.9%, an adjusted profit per share of $1.76, and consolidated revenue of $22.25 billion. UPS also revised its full-year adjusted operating margin forecast to 9.6%, signaling confidence in its financial health.
In addition to financial performance, UPS has also integrated the United States Postal Service air cargo business expecting it to be profitable in its first year. The company also announced plans to hire 100,000 seasonal workers for the holiday season. These are among the recent developments that continue to shape the trajectory of UPS.
InvestingPro Insights
To complement the analysis provided by Evercore ISI, InvestingPro data offers additional insights into UPS's financial position and market performance. Despite the challenges mentioned in the article, UPS maintains a strong dividend profile, with InvestingPro Tips highlighting that the company has raised its dividend for 14 consecutive years and has maintained dividend payments for 26 consecutive years. This consistency in dividend growth could be attractive to income-focused investors, especially considering the current dividend yield of 4.96%.
The company's financial metrics from InvestingPro also provide context to UPS's recent performance. With a market capitalization of $117.93 billion and a P/E ratio of 22.36, UPS trades at a premium compared to some peers. This valuation is further emphasized by the InvestingPro Tip noting that UPS is trading at a high Price / Book multiple, which stands at 6.92 for the last twelve months as of Q2 2024.
While the article mentions challenges in demand and a shorter peak delivery period, InvestingPro data shows that UPS remains profitable, with a revenue of $89.5 billion over the last twelve months as of Q2 2024. However, the revenue growth rate of -6.94% over the same period aligns with the cautious outlook presented in the article.
For investors seeking a more comprehensive analysis, InvestingPro offers 8 additional tips for UPS, providing a deeper understanding of the company's financial health and market position.
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