NEW YORK (TheStreet) -- UPS (UPS - Get Report), the world's largest package delivery services company, will reportsecond-quarter earnings results Tuesday before the opening bell. With shares down some 14% on the year to date, investors looking for a solid bounceback candidate that pays a great dividend should consider UPS stock. Not to mention, the Atlanta-based company is buying back its shares.
Combined with an improving economy, a strengthening labor market, which should spur more consumer spending, UPS should see an increase in shipping demand for retailers in the quarters and years ahead. This means, regardless of how tepid UPS' near-term growth prospects may appear today, investors who buy and hold for the long term can still be rewarded. For that matter, there are already some signs of improvement in the company's projections.
For the quarter that ended June, the average analyst earnings-per-share (EPS) estimate stands at $1.27 on revenue of $14.51 billion, marking year-over-year increases of 5% and 1.70%, respectively. For the full year ending in December, earnings are projected to climb 9% year over year to $5.19 a share, while revenue of $29.7 billion would mark a 2.5% increase.
The company has struggled with declining demand in its Express Freight shipping services -- its highest-margin business. But management expects demand to increase. Earnings in 2014 declined 30%.
The company has struggled with declining demand in its Express Freight shipping services -- its highest-margin business. But management expects demand to increase. Earnings in 2014 declined 30%.
Earlier this month, UPS expanded its Express Freight service, adding five countries in Latin America and three more in Europe. Adding these new destinations -- the second time UPS has done so this year -- implies confidence in the growth potential of the Express segment. What's more, UPS also projects company sales growth in the next four years to be in the range of 5% to 7% -- almost two percentage points higher than fiscal 2014.
During that span, the company expects operating profit to grow in the range of 8% to 11%, while earnings per share are projected to grow 9% to 13%. This means, despite the company's current revenue struggles, where revenue is projected to climb just 2.5% for full-year 2015, UPS expects its business to improve. Better still, from an investment perspective, the company's EPS growth projections imply shareholders can still make money even if sales don't drastically improve.
To the extent UPS, which has an average analyst 12-month target of $109, can execute on its expansion plans along with capital expense cuts, these shares should reach $110 to $115 in the next 12 to 18 months, delivering some 14% gains from current levels of around $95.
By Richard Saintvilus
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