When United Parcel Service releases its second-quarter earnings on Tuesday morning, investors will be closely monitoring costs and assessing the state of the economy. Of particular significance is the recent five-year labor agreement between the company and the Teamsters union, with wages set to increase by an average annual rate of approximately 6% throughout the duration of the contract. Investors and analysts will be eager to learn about any productivity improvements secured by UPS in the negotiations and how the overall agreement will impact future profit margins.
Although Wall Street has not made substantial adjustments to its earnings projections based on the labor deal, it remains attentive for insights from the company. The current estimate for 2024 earnings stands at $11.64, representing a marginal decrease of less than 1% from the previous projection of $11.71 a few weeks ago.
For the second quarter, analysts anticipate earnings per share of $2.49 on sales totaling $23 billion, as reported by FactSet. In comparison, UPS recorded EPS of $3.29 from sales amounting to $24.7 billion during the same period last year.
Both sales and earnings have experienced declines due to the sluggish economy. CFO Brian Newman acknowledged the challenging macro environment during UPS’s first-quarter earnings conference call in April, noting that the decline in daily package shipments was slightly worse than anticipated, falling by 5.4% compared to the previous year.
As a result of the economic slowdown, UPS stock has been negatively affected, experiencing a 7% decrease since the first-quarter report. In contrast, the S&P 500 has risen by approximately 9% over the same period. On the day of the report, UPS shares dropped by roughly 10%, but have since recovered by approximately $6 from their initial reaction.
On Monday, UPS stock closed at $182.13, reflecting a 0.7% increase. Meanwhile, the S&P 500 and Dow Jones Industrial Average saw gains of 0.8% and 1.2%, respectively.
Management will host a conference call at 8:30 a.m. Eastern time to further discuss the quarterly results.
