Last week, you might have seen that United Parcel Service, Inc. (NYSE:UPS) released its first-quarter result to the market. The early response was not positive, with shares down 5.5% to US$94.66 in the past week. It was not a great result overall. Although revenues beat expectations, hitting US$18b, statutory earnings missed analyst forecasts by 11%, coming in at just US$1.11 per share. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, United Parcel Service's 24 analysts currently expect revenues in 2020 to be US$74.1b, approximately in line with the last 12 months. Statutory earnings per share are predicted to swell 12% to US$5.58. Before this earnings report, the analysts had been forecasting revenues of US$71.2b and earnings per share (EPS) of US$6.58 in 2020. So it's pretty clear the analysts have mixed opinions on United Parcel Service after the latest results; even though they upped their revenue numbers, it came at the cost of a real cut to per-share earnings expectations.
The consensus price target was unchanged at US$105, suggesting the business is performing roughly in line with expectations, despite some adjustments to profit and revenue forecasts. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values United Parcel Service at US$125 per share, while the most bearish prices it at US$60.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that sales are expected to reverse, with the forecast 1.2% revenue decline a notable change from historical growth of 6.0% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 5.4% annually for the foreseeable future. It's pretty clear that United Parcel Service's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for United Parcel Service. Fortunately, they also upgraded their revenue estimates, although our data indicates sales are expected to perform worse than the wider industry. The consensus price target held steady at US$105, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn't be too quick to come to a conclusion on United Parcel Service. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple United Parcel Service analysts - going out to 2024, and you can see them free on our platform here.
Before you take the next step you should know about the 1 warning sign for United Parcel Service that we have uncovered.
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