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UPS Shares Fall Amid Muted Full-Year Package Delivery Outlook

United Parcel Service shares fall despite better-than-expected second-quarter earnings and revenue amid a more muted full-year outlook.

United Parcel Service  (UPS) - Get United Parcel Service, Inc. Class B Report shares fell more than 8% on Tuesday after reporting better-than-expected second-quarter earnings driven by e-commerce related package deliveries but also sharing a more muted full-year outlook.

UPS said it earned $3.43 billion, or $3.05 a share, in the second quarter, vs. $11 million, or 1 cent a share, in the second quarter of 2020. Analysts polled by FactSet had been expecting earnings of $2.81 a share.

Revenue for the quarter totaled $23.4 billion, up 14.5% from $20.46 billion a year earlier and just slightly ahead of analysts’ forecasts of $23.2 billion.

The results included charges of $11 million, or the equivalent of 1 cent a share. Also in the second quarter, the company completed its divestiture of UPS Freight on April 30, which triggered a $2.1 billion reduction in pension-related liabilities, UPS said.

TheStreet's Jim Cramer was surprised by investors' reaction to the earnings, which pushed the stock down more than 9% in the first 30 minutes of regular trading.

Third Bridge analyst Patrick Donnelly was a bit more specific, warning in a research note following the earnings release that AMZN's fulfillment efforts appear to making a dent in UPS's long-term outlook.

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"The biggest risk for the company moving forward will be the continued competitive pressure by Amazon Fulfillment" Donnelly wrote. "As a customer and competitor, Amazon is able to cherry pick the most attractive parcels for final mile delivery while leaving UPS with the remaining volume."

Year-to-date cash from operations was $8.5 billion, up 42.2% from the same period in 2020, with free cash flow of $6.8 billion, a 74.7% increase above the first six months of 2020.

U.S. package revenue rang in at $14.4 billion, an increase of 10.2% year over year, while international package revenue was $4.82 billion, up 30% from a year ago. Supply chain solutions revenue was $4.21 billion, up 14.3%.

For 2021, UPS said it now expects consolidated operating margin of approximately 12.7% and return on invested capital of approximately 28%. It also forecast capital expenditures of about $4 billion and said long-term debt repayments of $2.55 billion have been completed. 

The company did not provide per-share earnings or revenue guidance.

At last check, shares of UPS were down 8.14% at $192.77. The stock has risen more than 57% in the past 12 months and 16% year to date.

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