Should You Buy United Parcel Service Stock Ahead of Its Q4 Earnings?

United Parcel Service UPS is scheduled to report fourth-quarter 2024 results on Jan. 30, before market open.Find the latest EPS estimates and surprises on Zacks Earnings Calendar.The Zacks Consensus Estimate for fourth-quarter 2024 earnings was revised marginally upward in the past 60 days and is pegged at $2.52 per share. The consensus mark implies a 2% uptick from the year-ago actual. The Zacks Consensus Estimate for fourth-quarter 2024 revenues is pegged at $25.34 billion, suggesting a 1.7% rise from the year-ago actual. Image Source: Zacks Investment Research UPS has an impressive earnings history. It surpassed the Zacks Consensus Estimate in three of the past four quarters and missed the mark on the other occasion, the average beat being 1.5%.United Parcel Service, Inc. Price and EPS Surprise  United Parcel Service, Inc. price-eps-surprise | United Parcel Service, Inc. Quote Earnings Whispers for Q4Our proven model predicts an earnings beat for United Parcel Service this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.UPS currently has an Earnings ESP of +0.97% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.Factors Likely to Shape UPS’s Q4 ResultsWe expect high labor costs to have hurt United Parcel Service’s bottom-line performance in the quarter under review. The labor deal inked with the International Brotherhood of Teamsters in 2023 is likely to have increased labor costs.Low fuel costs are expected to have aided UPS’s bottom-line performance in the December-end quarter. The top-line performance in the to-be-reported quarter is likely to have been driven by higher revenues from the U.S. Domestic Package segment and the International Package unit. The U.S. Domestic Package segment has likely been driven by the strong retail sales environment and International Package unit on increased exports from China.We expect revenues from the U.S. Domestic Package segment to increase 1.7% in the fourth quarter of 2024 from the prior-year quarter’s actual. Reportedly, Chinese exports to the United States rose in the double digits (percentage-wise) in December from a year ago. The impressive increase came as factories rushed to fill orders to beat higher tariffs threatened to be imposed by U.S. President Donald Trump on Chinese goods. The significant rise in China exports is expected to have boosted United Parcel Service’s international revenues in the December-end quarter. We expect revenues from the International Package segment to increase 5% year over year in the December-end quarter.Dismal Price Performance UPS StockThe UPS stock has performed unimpressively on the bourses in a year. The stock has depreciated 16.3%, performing worse than its industry’s 10.2% decline in the same timeframe. The S&P 500 composite index rose 25.3% in the same time frame and the Zacks Transportation sector inched up 0.9%. UPS has also lagged its rival FedEx FDX and another industry player, Air Transport Services ATSG, in a year.One-year Price Comparison Image Source: Zacks Investment Research UPS Trades Cheaper Than SectorFrom a valuation perspective, United Parcel Service is trading at a discount compared with the sector based on its price/sales ratio. The company is trading at a forward sales multiple of 1.2 compared with its sector’s 1.83. The company has a Value Score of A. The reading is also below its median of 1.54 over the last five years. Image Source: Zacks Investment Research Investment Thesis for UPS StockIt is hardly surprising that e-commerce demand has slowed from the levels witnessed at the peak of the pandemic with the reopening of economies. However, it is still impressive, driven by the convenience associated with online shopping. Strong e-commerce demand should continue to support growth of UPS. The company demonstrated financial strength with $5.3 billion in free cash flow in 2023. Its valuation is attractive as well.Geopolitical uncertainty and high inflation continue to hurt consumer sentiment and growth expectations. For 2024, United Parcel Service anticipates revenues of $91 billion (prior view: $93 billion). For 2024, UPS expects a consolidated adjusted operating margin of 9.6%. High labor costs are hurting the bottom line.Final ThoughtsWe can safely conclude that investors should refrain from rushing to buy United Parcel Service, which is facing quite a few challenges, ahead of its earnings release on Jan. 30. Instead, they should monitor the developments pertaining to the stock closely for a more appropriate entry point, as an erroneous and hasty decision could affect portfolio gains. UPS’s current Zacks Rank supports our thesis.Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report United Parcel Service, Inc. (UPS): Free Stock Analysis Report FedEx Corporation (FDX): Free Stock Analysis Report Air Transport Services Group, Inc (ATSG): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks