Parcel delivery giant UPS (UPS) releases its second-quarter results before market open on Tuesday. UPS stock fell slightly on Monday.
The company reports as Wall Street eases worries about a recession and the impact of rising prices for things like gas and food. Meanwhile, freight rates and volumes are cooling after a year of supply chain chaos.
UPS Revenue, UPS Stock
Estimates: Analysts expect UPS profit to rise 3% to $3.16, on revenue of $24.662 billion, a gain of 5%.
Results: To be submitted before the opening on Tuesday.
UPS shares slid a fraction, closing at 187.91 in the stock market today. The stocks have a composite rating of 84, with an EPS rating of 90.
Rival fedex (FDX) rose 0.6% to 228.66. FedEx last month offered a stronger-than-expected outlook for fiscal 2023.
UPS stock is far from the records reached in February. It has been rebounding since late May, retaking and maintaining support at its 10-week moving average since late June. Shares remain down 12% so far this year.
Federal Reserve Recession: New Fiscal Data Raises Huge Red Flag
“Investor sentiment toward UPS has become more cautious in recent months given growing concerns about consumer demand and growing concerns about labor inflation for UPS when its new NMFA takes effect (at second half of 2023),” Stephens analyst Jack Atkins said in a note last week, referring to a new collective bargaining agreement with the Teamsters.
Speculation grew that the new Teamsters leadership could take a much tougher stance in negotiations with employers. This concern raises the prospect of a strike at the parcel delivery man which could send shockwaves through the country’s delivery network and the economy.
UPS reports quarterly results after a flurry of consumer spending in 2020 and last year supported ports, warehouses and rail yards and drove up shipping costs. Russia’s invasion of Ukraine earlier this year has driven up the price of oil, gas, crops and fertilizers, increasing the costs consumers have to pay for basic necessities.
UPS management in April said rising prices had started to hit shipping demand.
Why This IBD Tool Simplifies Finding Best Stocks
UPS Chief Financial Officer Brian Newman on the company’s first quarter earnings call in April said that “at the end of the quarter, the combination of record inflation, soaring energy prices, Covid-19 lockdowns in Asia and geopolitical uncertainty caused our consolidated volume growth rates to turn negative.”
More recently, US customers have also spent less money online on things that need to be packed and shipped by truck and more on travel, restaurants and entertainment.
And even as China’s economy slowly reopens, UPS stock analyst Atkins said the nation has not been “the impending market catalyst today that many anticipated last quarter.” Some analysts have said China’s reopening could support freight prices, as imports from the country flood global shipping routes.
The container ship traffic jams that were emblematic of last year’s supply chain mess have thinned out at the ports of Los Angeles and Long Beach, the biggest import gateways along the West Coast. However, the trucking and transportation provider J.B. Hunt (JBHT), on its quarterly earnings call this month, noted “obvious service challenges” within its rail network further inland.
Railway yards across the country, particularly along the west coast, are still trying to clean up stacks of containers, as tensions persist with railway workers. Gene Seroka, executive director of the Port of Los Angeles, also said railroads needed to be faster in moving railcars through the region and freight owners needed to be faster in picking up their goods, according to Bloomberg.
YOU MIGHT ALSO LIKE:
See stocks on the leader list near a buy point
Everyone (except baby boomers) thinks it’s the best stock to own
Natural gas inventories: these producers will soon publish their second quarter results
Stock Tesla vs. BYD Stock: Tesla Soars on Earnings; Chinese electric vehicle giant targets Japan
IBD 50 Stocks to Watch: Defensive Stocks Near Buy Point Ahead of Earnings Report