UPS Posts Q3 Beat, Cuts Revenue Outlook: 'Manufacturing Needs To Recover For Uncertainty To Subside,' Analyst Says

United Parcel Service, Inc. UPS Thursday reported its first revenue beat in 10 quarters.

The company reported its results amid an exciting earnings season. Here are some key analyst takeaways.

• Stifel analyst Bruce Chan maintained a Buy rating, while lifting the price target from $151 to $156.
• Bank of America Securities analyst Ken Hoexter reiterated a Neutral rating, while raising the price target from $132 to $150.
• Goldman Sachs analyst Jordan Alliger reaffirmed a Buy rating, while lifting the price target from $162 to $167.

Check out other analyst stock ratings.

Stifel: UPS generated revenues of $14.4 billion, up 5.8% year-on-year and "outperformed our model on better volume growth (6.5% vs. 5.0% est) and relatively in-line yield growth," Chan said in a note. Adjusted earnings came in at $1.76 per share, beating Street expectations of $1.63 per share, he added.

"U.S. Domestic was a standout, with better volume growth on in-line rev/piece and better cost controls driving margin upside," while International remained under pressure, the analyst wrote. Management indicated "a profitability and margin inflection" in the back half of 2024 and the company's margin outlook appears "incrementally better," he further stated.

Bank of America Securities: The company's earnings grew by 12% year-on-year, "as UPS countered mix pressure through dynamic pricing, cost management initiatives, and growth in average daily volume (ADV), with higher-margin business-to-business (B2B) volume up year-year for the first time in two years," Hoexter said.

UPS Service indicated that its Fit to Serve program, which resulted in 12,000 management job cuts for projected savings of $1 billion in 2024, is tracking ahead of target, he added.

Management lowered their revenue guidance from $93 billion to $91.1 billion. Around $700 million of that is due to the sale of Coyote Logistics. The company raised its operating margin target for 2024 from 9.4% to 9.6%, let by cost cutting initiatives, he further mentioned.

Goldman Sachs: UPS's total EBIT (earnings before interest and taxes) came in around 6% above estimated, "as relatively inline revenues were more than offset by stronger than expected Domestic margin," Alliger said. Given the "tough 18 months or so," the company's outperformance and solid outlook for the rest of the year "should be a positive catalyst for investors," he added.

Manufacturing and B2B need to recover for the uncertainty around UPS's earnings to subside and the consumer demand environment needs to strengthen, the analyst stated. He added, however, that domestic margin pushing above forecasts is encouraging, "at least for the time being."

Price Action: Shares of UPS had risen by 0.3% to $138.75 at the time of publication on Friday.

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