UPS Facing Challenges as Labor Issues Impact Market Share

Shares of United Parcel Service Inc. (UPS) took a hit on Monday as investors braced themselves for the package-delivery giant's upcoming quarterly results. Over the past few quarters, these reports have been less than favorable for investors.

The company is scheduled to release its fourth-quarter earnings report on Tuesday at approximately 6 a.m. Eastern time. Historically, UPS's stock has experienced an average decline of 5.6% on the day these reports are made public. In fact, the stock has fallen on the day of six out of its past seven reports. As of Monday afternoon, UPS shares had dropped 1.6%. Despite this, they have seen a 16.2% increase over the last three months. In comparison, rival company FedEx Corp. has gained 87.8% and the S&P 500 index has advanced 19.1%.

Profit has not been an issue for UPS, as they have consistently exceeded expectations for earnings per share in the last 14 quarters. However, it is revenue that has fallen short of expectations for the past five quarters. The company has revised its full-year revenue guidance downward in each of the last three quarters and provided an outlook below forecasts in the previous quarter.

Market analyst Jonathan Chappell from Evercore ISI has expressed concerns that UPS may once again miss expectations or revise their outlook downward. Chappell points to a potential downside in UPS's U.S. domestic revenue based on his trend analysis. Additionally, he highlights the deceleration in China's exports as a headwind for UPS's international revenue.

Investors eagerly await UPS's fourth-quarter report to assess the performance and future prospects of the company.

UPS Facing Challenges as Labor Issues Impact Market Share

Labor-Related Headwinds and Market Share

Recent labor-related challenges have posed difficulties for UPS, potentially allowing its competitors to gain an advantage. In December, when questioned about maintaining market share during UPS's tense labor negotiations, FedEx Chief Customer Officer Brie Carere confidently affirmed their success in this regard, as reported by AlphaSense transcripts.

UPS Struggles in Fourth Quarter

TD Cowen analyst Helane Becker pointed out that UPS faced a tough fourth quarter due to labor issues. The company had to navigate the cost of a new contract with the Teamsters union while simultaneously avoiding losing shippers to other delivery companies.

Becker maintained her market-perform rating on UPS's stock and kept her price target at $175.

Key Financial Metrics

According to FactSet, the current average analyst estimates for UPS's key financial metrics are as follows:

• Earnings per Share: The FactSet consensus for EPS is $2.46, a significant decrease from $3.62 in the same period the previous year. The consensus has dropped considerably since the end of the third quarter, where it stood at $3.03.

• Revenue: The FactSet revenue consensus is $25.398 billion, down from $27.033 billion a year ago and below the September 29 consensus of $26.247 billion.

• U.S. Domestic Package Revenue: The expected U.S. Domestic Package revenue is $17.39 billion, compared to the September 29 consensus of $17.82 billion and the reported value of $18.25 billion last year.

• International Revenue: A decline in international revenue is projected with an estimate of $4.64 billion, compared to last year's figure of $4.95 billion. The September consensus was $4.70 billion.

• 2024 Revenue Outlook: The FactSet consensus for 2024 revenue has decreased to $95.51 billion, compared to $98.00 billion as of September 29.