UPS earnings: Where volumes, labor costs fit into its outlook
United Parcel Service (UPS) posted its first-quarter earnings to mixed results with adjusted earnings per share at $1.43 against an estimated $1.30, but revenue came under estimations with $21.71 billion against an expected $21.83 billion. The company also reported a 3.2% decline in average daily volumes in its domestic business and a 5.8% drop in its international segment, signaling a softening of demand in deliveries. Could this be a warning sign of things to come with consumer demand?
Bank of America Senior Transportation Analyst Ken Hoexter joins Yahoo Finance to give insight into UPS's earnings and what it signals for the bigger picture.
Hoexter outlines how UPS could stage a comeback on forward projections and after this quarter's results:
"I think the momentum really will be on the volume side. We know that the earnings were really hit as they signed a new Teamster employment contract this year. You've got really tough comps because of that on the cost side where employment costs are up 13% year-over-year. You have this huge tough comp until we anniversary that over the summer. So then you're going to have almost a flattish labor cost from that point forward. It really becomes you need that operating leverage of getting volumes into this fixed cost network that you can get some of that leverage. I think that's why you're seeing the focus on where volumes are for this stock in particular because that's really what's going to drive future earnings, is if you can see top-line growth."
For more expert insight and the latest market action, click here to watch this full episode.
This post was written by Nicholas Jacobino
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