This past year was more difficult than United Parcel Service imagined when it set its three-year goals back in 2021.
stock closed above $200 a share on June 9, after the 2021 meeting. Shares closed this past week at $156.27.
On Tuesday, UPS is set to meet with analysts and investors in Louisville, Ky., at the company’s “Worldport,” where it processes packages at the mind-boggling rate of roughly 400,000 per hour.
The meeting can be big for UPS’s struggling stock.
Both groups want evidence the company’s strategy will translate into improving sales growth, profit margins, and stock price performance than when UPS hosted its 2021 analyst event—done virtually amid the COVID-19 pandemic.
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The event familiarized investors with the “better not bigger” strategy spearheaded by CEO Carol Tome, who took the top job in early 2020. “Better not bigger” renewed the company’s focus on pursuing higher margin business from small and medium-sized companies as well as focusing on cost control and capital efficiency.
The 2021 three-year goals called for 2023 sales of up to $102 billion and up to $14 billion in operating profit, but things didn’t turn out that well.
Sales in 2023 came in at $91 billion, down 9.3% from 2022. The economy and labor negotiations both impacted growth negatively. Some businesses sent UPS volume to
in case there was a strike. UPS’s operating profit came in just under $10 billion.
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For 2024, management’s current guidance calls for sales to fall between $92 billion and $94.5 billion with operating profit ranging from $9.2 billion to $10 billion. Wall Street currently projects sales of $93.2 billion and operating profit of $9.7 billion.
In recent months, the “better not bigger” strategic summary has given way to “bolder and bigger.” That summary still includes pricing gains and capital discipline. UPS also aims to gain market share in key business segments.
“We expect the company to discuss its plans for double-digit margins, capital allocation, and growth, including opportunities in healthcare distribution,” wrote TD Cowen analyst Helane Becker in a report previewing the event.
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Becker, who rates shares Hold and has a $147 price target, wrote that healthcare was a $10 billion business in 2023.
Bernstein analyst David Vernon expects new three-year targets to top the Street. Currently, Wall Street sees 2026 sales at $101 billion and operating profit at $12 billion. That implies average annual sales growth of just over 3% and operating profit growth of almost 7%.
Vernon wrote recently that sales growth could fall between 4% to 5% a year on average with operating profit growth exceeding 10%. He rates shares Buy and has a $182 price target for the stock.
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Overall, 37% of analysts covering the company rate shares Buy. The average Buy-rating ratio for shares in the S&P 500 is about 55%. The Buy-rating ratio on UPS stock was about 53% a year ago.
Higher labor costs and a slowing economy have weighed on investor and analyst sentiment.
Wall Street’s consensus call for 2024 earnings per share estimates is about $8.30, down from $12.34 a year ago. The average analyst price target for UPS stock is about $160 a share. A year ago, the price target was about $196 a share.
Through midday trading Monday, UPS stock was down about 16% over the past 12 months, trailing the
and
by about 48 and 56 percentage points, respectively.
Write to Al Root at allen.root@dowjones.com
