Send me real-time posts from this site at my email
Zacks

Coronavirus Concerns May Deal a Blow to UPS' Q1 Results

Per Reuters, United Parcel Service, Inc. UPS has given a heads up on the likely impact of the coronavirus outbreak on first-quarter 2020 results. The novel coronavirus outbreak having begun in Wuhan, China at the end of last year has now spread to more than 70 countries worldwide with over 92,000 confirmed cases of the infection and above 3,000 deaths across the globe.

At the Raymond James investors’ conference held on Mar 3, UPS’ chief financial officer Brian Newman stated that "the business obviously slowed" due to the fast-evolving coronavirus and that it might hamper shipment of goods, which in turn, is expected to hurt first-quarter performance. However, the company’s planes are still operating in China.

UPS rival FedEx Corporation FDX is also operating flights to and from the affected countries but feels that work and travel restrictions might affect the transport of shipments.


UPS’ bottom line is already stressed by heavy capital expenses as it makes consistent efforts to upgrade facilities to cater to rising demand following rapid e-commerce growth. In 2019, the company made capital investments worth $6.5 billion. The capex is expected to increase to $6.7 billion during 2020 due to investments in additional automated sorting hubs for expanding its retail client base. The escalating capital expenses are anticipated to dent the company’s 2020 earnings per share by roughly 33 cents. Additionally, given how fast the coronavirus is spreading globally with no sign of subsiding anytime soon, there are chances that UPS’ 2020 results might be affected by the calamity as well.

Zacks Rank & Key Picks

UPS carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Transportation sector are GATX Corporation GATX and Controladora Vuela Compania de Aviacion, S.A.B. de C.V. VLRS, both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

GATX flaunts an impressive earnings history, having outperformed the Zacks Consensus Estimate in each of the preceding four quarters, the average being 21%. Meanwhile, shares of Controladora Vuela have rallied more than 14% in a year’s time.

Today's Best Stocks from Zacks

Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.

This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.

See their latest picks free >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
United Parcel Service, Inc. (UPS): Free Stock Analysis Report
 
FedEx Corporation (FDX): Free Stock Analysis Report
 
Controladora Vuela Compania de Aviacion, S.A.B. de C.V. (VLRS): Free Stock Analysis Report
 
GATX Corporation (GATX): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research

Welcome! Is it your First time here?

What are you looking for? Select your points of interest to improve your first-time experience:

Apply & Continue