The analyst firm also reduced its EPS estimates for the company through 2016. UPS is investing more in future growth according to Credit Suisse analysts Allison M. Landry, Daniel Schuster, and Kenneth Ryan.
The analysts noted that UPS lowered its own EPS estimates for 2014, writing that "The primary drivers of the downward revision are 1) an incremental $75 million in opex associated with peak season prep (up from prior $100m); 2) costs related to the handling of faster than expected volume growth across the portfolio; and 3) increased expense headwinds related to rail issues (which hurt Q2 by ~$25m)."
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Separately, TheStreet Ratings team rates UNITED PARCEL SERVICE INC as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:
"We rate UNITED PARCEL SERVICE INC (UPS) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, good cash flow from operations and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite its growing revenue, the company underperformed as compared with the industry average of 3.5%. Since the same quarter one year prior, revenues slightly increased by 2.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Air Freight & Logistics industry and the overall market, UNITED PARCEL SERVICE INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Net operating cash flow has increased to $2,267.00 million or 28.95% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 17.16%.
- UNITED PARCEL SERVICE INC's earnings per share declined by 9.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, UNITED PARCEL SERVICE INC increased its bottom line by earning $4.62 versus $0.80 in the prior year. This year, the market expects an improvement in earnings ($5.08 versus $4.62).
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- You can view the full analysis from the report here: UPS Ratings Report
Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.