Earnings Preview: United Parcel Service

United Parcel Service (UPS) is expected to report Q1 earnings before market open Wednesday, April 23, with a conference call scheduled for 8:30 am ET.

Guidance

Analysts are looking for EPS of 77c on revenue of $2.63B. The consensus range is 71c to 83c for EPS, and $2.55B to $2.77B for revenue, according to First Call.

UPS gave guidance in January when the company released its Q4 earnings. The company expected Q1 EPS 94c to 98c vs. consensus of 98c, and FY08 EPS $4.30 to $4.50 vs. consensus of $4.45. UPS CEO D. Scott Davis also noted that Q1 will be the "most difficult" of the year. The company reaffirmed its FY08 EPS guidance on March 12, but on April 8 UPS lowered its Q1 EPS guidance to 86c to 87c. The company explained that the weakening U.S. economy was causing a reduction in domestic packaging volume and a shift away from premium products. Significantly higher fuel costs are also hurting UPS's results.

Analyst Views

JP Morgan maintained its Overweight rating for UPS on April 9, the firm attributes weakness in air express volumes as well as high fuel prices for the weakness in Q1 and feels near-term upside drivers are unclear in the near-term.

On April 9, Robert W Baird said that despite economic headwinds likely stalling the stock in the near-term, as well as reduced investor confidence, the firm believes the company is still an excellent stock to hold in the long-term. Baird reduced 2008-2009 EPS estimates to reflect increasing fuel costs and deteriorating economy. The firm maintained its Outperform rating on the company's stock given the attractive long-term growth opportunities.