UPS Earnings Preview: Strong Profit Growth Seen on Modest Sales Gains

As the world's biggest package delivery company, UPS's (UPS) earnings will likely get extra attention for their macroeconomic implications when the company reports second-quarter results ahead of Thursday's opening bell.

Lower fuel costs and higher volume versus the prior-year period are forecast to help UPS post sharply higher profits on relatively modest revenue gains. Analysts surveyed by Thomson Reuters expect UPS to report second-quarter earnings, on average, of 77 cents a share, up from 49 cents a share recorded in last year's period.

Revenue, on average, is projected to rise more than 10% to $11.98 billion, according to Thomson Reuters. UPS has beaten Wall Street estimates on the bottom line for four consecutive quarters and exceeded revenue forecasts for the last two quarters.

Avondale Partners analyst Donald Broughton, who rates shares at market perform based on valuation, told clients key factors in the report will be indications of market-share gains versus rival FedEx (FDX), how the slowdown in Europe is affecting Trans-Atlantic volumes, and the effect of currency fluctuations on earnings.

Shares in UPS are up about 4% year to date, outperforming the broader market by about 8 percentage points. (See chart below.) Analysts' average price target stands at $76.90, according to Thomson Reuters. Add in UPS's 3.1% dividend yield and the implied upside comes to nearly 30% in the next 12 months or so.