Investing.com -- Evercore ISI added United Parcel Service Inc (NYSE:UPS) stock to its Tactical Outperform list and updated its outlook ahead of the company's fourth-quarter 2024 earnings report and full-year 2025 guidance, scheduled for January 30.
In a Wednesday note to clients, the investment bank highlighted improved data points in UPS’ US Domestic revenue and International Revenue, suggesting potential for an earnings per share (EPS) upside in Q4 2024. The positive outlook also extends to derisking the 2025 EPS guidance.
Evercore made slight adjustments to its estimates, reducing the Q4 2024 EPS forecast to $2.54 from $2.56 and the full-year 2025 estimate to $8.77 from $8.84, primarily due to softer international pricing forecasts. Despite these modest tweaks, the firm sees potential for volume upside in both US Domestic and International segments if recent data trends persist.
“Without a fear of the next miss or lower, we believe the stock can finally revert some its material underperformance since mid-2023, and we think a meet/in-line outcome for 4Q24 and the FY25 guide could result in a short-covering event,” analysts led by Jonathan Chappell said.
As such, analysts have added UPS stock to their Tactical Outperform list and raised the price target to $147 from $141, incorporating 2026 estimates that project consecutive double-digit EPS growth years for the company.
The firm's analysis indicates that a strong retail sales environment, coupled with a weaker industrial production, could lead to an acceleration in US Domestic revenue for UPS. December retail sales showed a significant increase of 20.9%, while industrial production declined by 5.1%.
Evercore is maintaining its estimate for UPS US Domestic revenue in Q4 2024 at a 6% decrease, which could be conservative if revenue follows the accelerating trend in the retail and industrial production index.
Moreover, Evercore notes an uptick in China Exports as a definitive tailwind for UPS International revenue.
With China Exports rising to 13% in December, the Q4 2024 figures strengthened to 9% from a 4% decrease in the previous quarter. This improvement in China Exports is expected to result in "less weakness" for UPS International revenue, which is forecasted at a 3% decrease for Q4 2024, following an 8% decrease in Q3 2024.
The firm's Air Cargo Survey remained steady overall, with both domestic and international sales surveys showing no significant change.