NEW YORK (TheStreet) -- United Parcel Service (UPS) shares closed trading down 1.17%% to to $108.55 on Wednesday on heavy volume after the shipping company's rival, FedEx (FDX) , reported second quarter earnings results that missed analyst expectations.
The stock fell on heavy trading today with 5.64 million shares being traded today, ahead of its three month daily average of 3.57 million.
FedEx reported second quarter earnings of $616 million, or $2.14 per diluted share, that fell below analysts' guidance by 8 cents. The company also generated $11.94 billion in revenue during the quarter, which was just short of the $11.99 billion analysts were expecting.
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The company said that its earnings for the period were hurt in part by the high maintenance costs of its aircraft. However, compared to FedEx, UPS historically achieves significantly wider margins and a return on invested capital that is approximately double.
Earlier this week analysts at Deutsche Bank downgraded UPS stock to "hold" from "buy" while setting a $116 price target on the shares and reiterating the firm's $1.45 fourth quarter EPS estimate for the company.
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, growth in earnings per share and increase in net income. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- UPS's revenue growth has slightly outpaced the industry average of 5.5%. Since the same quarter one year prior, revenues slightly increased by 5.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- UNITED PARCEL SERVICE INC has improved earnings per share by 13.8% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. 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 ($4.96 versus $4.62).
- 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 $2,359.00 million or 44.81% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 27.98%.
- The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. 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