By Laura Stevens
United Parcel Service Inc. (UPS) is scheduled to announce its
third-quarter earnings before the market opens Friday. Here's what
you need to know:
EARNINGS FORECAST: Net income of $1.28 a share is the consensus
of analysts surveyed by Thomson Reuters, compared with $1.16
reported a year earlier. The company hasn't provided guidance for
the third quarter, but in July said it expects per-share earnings
to rise between 7% and 9% for the year to between $4.90 and $5.
REVENUE FORECAST: Revenue of $14.2 billion is forecast, compared
with $13.52 billion reported the year earlier.
WHAT TO WATCH:
--LOWER FUEL PRICES: Fuel prices fell during the quarter, an
important factor for a transportation company that has nearly
100,000 vehicles on the road, plus more than 500 airplanes it owns
and charters. "Declining fuel prices is such a tailwind for them,"
says Kevin Sterling, an analyst with BB&T Capital. Rival FedEx
Corp. (FDX) also benefited from lower fuel prices when the company
reported higher-than-expected earnings in September.
--PEAK SPENDING: While reporting second-quarter earnings, UPS
said it would boost its spending for its holiday peak season to
$175 million, from a projected $100 million, to invest in new
technology, expand capacity and add more seasonal workers. Cost
savings through investments in technology such as hub automation
and Orion, the company's dynamic routing system, could already
start to show up in the third quarter, analysts say. Orion "should
continue to pay off as it gets rolled out," says David Vernon, a
Bernstein analyst.
--EUROPE VS. US: One thing that could weigh on gains is the
recent economic weakness in Europe. UPS is heavily invested in
Europe, and about 15% of UPS's revenue stem from its business
there, estimates Stephens analyst Jack Atkins. The recent problems
there -- combined with the lower value of the euro -- could result
in a headwind, he says. Analysts will keep a close eye on the
company's international numbers, as well as its currency
hedging.
Write to Laura Stevens at Laura.Stevens@WSJ.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires