UPS recently reported its Q1 results, with revenues missing but earnings ahead of estimates. The company’s revenue was $21.7 billion and adjusted earnings were $1.43 per share, compared to estimates of $22 billion and $1.38, respectively. UPS stock has seen a decline of 10% from levels of $170 in early January 2021 to around $150 now, underperforming the S&P 500. Despite an upbeat Q1 earnings report, UPS stock may have little room for growth from its current levels. The company continues to face lower volume and pricing declines, affecting its overall revenue growth and operating margins.
It has been difficult for individual stocks to consistently beat the S&P 500 in recent years, including heavyweights in the Industrials sector and even megacap stars. The Trefis High Quality Portfolio, however, has outperformed the S&P 500 each year over the same period, providing better returns with less risk. As the macroeconomic environment remains uncertain with high oil prices and elevated interest rates, UPS may face challenges in the coming months. From a valuation perspective, UPS stock appears to have little room for growth, with an estimated valuation of $163 per share.
UPS’s Q1 revenue of $21.7 billion was down 5% year-over-year, with a soft demand environment affecting overall revenue growth. Operating margins have also been impacted, primarily due to the labor deal with the Teamsters Union ratified in August last year. The adjusted operating margin slid 300 basis points to 18% in Q1, leading to a 35% decrease in the bottom line. UPS continues to expect its 2024 revenue to be in the range of $92 billion to $94.5 billion, with an expected improvement in operating margin to 10%-10.6%. Significant growth in UPS stock may come in the second half of the year when the company delivers on margin expansion.
With UPS stock showing little room for growth, it is valuable to see how UPS’s peers fare on important metrics. Comparing UPS to its peers across various industries can provide insight into its performance relative to others in the market. As the company faces challenges in the current macroeconomic environment, investors will be watching closely to see if UPS can improve its operating margins and deliver on its revenue targets for the year. Despite uncertainties, UPS remains a key player in the logistics and transportation industry, and its performance will continue to be closely monitored by investors in the coming months.
