UPS recently reported its Q2 results, with revenues and earnings falling short of street estimates. The company reported revenue of $21.8 billion and adjusted earnings of $1.79 per share, compared to consensus estimates of $22.2 billion and $1.99, respectively. UPS stock has seen a decline of 15% from early January 2021 to around $125 now, underperforming the S&P 500. Despite this, the Trefis High Quality Portfolio has consistently outperformed the S&P 500, with better returns and less risk.
Given the current uncertain macroeconomic environment, UPS may face challenges in the coming months. However, from a valuation perspective, UPS stock appears to have room for growth. With an estimated valuation of $151 per share, reflecting an upside of over 15%, the forecast is based on a 19x P/E multiple for UPS and expected earnings of $7.96 on a per-share and adjusted basis for the full year 2024. The company’s Q2 revenue was down 1% year-over-year, with weak freight demand impacting performance across segments.
UPS saw a rebound in domestic volumes in Q2, with the U.S. Domestic average daily package volume up 0.7%. However, international volume was down 2.9% year-over-year. The average revenue per piece for U.S. Domestic packages was down 2.6% and down 1.7% for international packages. Despite these challenges, the company’s consolidated adjusted operating margin stood at 9.5%, with adjusted EPS plunging 29.5% year-over-year to $1.79 in Q2 2024. UPS also lowered its 2024 revenue outlook to $93 billion and adjusted operating profit margin outlook.
Following a downbeat Q2 and downward revision to its full-year outlook, UPS stock saw a 12% decline in the last five days, unsettling investors. However, from a valuation standpoint, UPS stock may have room for growth after its recent decline. Additionally, a rebound in U.S. volumes is a positive takeaway from the company’s latest results. It will be important to monitor how UPS’s peers fare on key metrics to gain a better understanding of the overall industry landscape and potential opportunities for growth.
