On Wednesday, Oppenheimer adjusted its outlook on shares of UPS (NYSE:UPS), increasing the price target to $157 from $153 while reiterating an Outperform rating. This adjustment follows the release of UPS's first-quarter earnings, which surpassed consensus expectations.
The courier giant reported first-quarter adjusted earnings per share (EPS) of $1.43, a 35% decline year-over-year, yet exceeding the analyst consensus of $1.30. Total revenue for the quarter fell 5.3% year-over-year to $21.706 billion, which was slightly below the consensus forecast of $21.844 billion. Despite the drop in revenue, UPS succeeded in outperforming profit expectations with an adjusted operating profit of $1.747 billion, down 31% year-over-year but ahead of the consensus of $1.627 billion.
The company's adjusted operating margin for the quarter stood at 8.0%, which was a decrease of 310 basis points year-over-year. However, it still managed to come in higher than the consensus estimate of 7.4%. UPS has decided to maintain its full-year 2024 revenue guidance, which forecasts a growth of 1-4% year-over-year, amounting to between $92.0 billion and $94.5 billion.
For 2024, the adjusted operating margin guidance remains unchanged at 10.0-10.6%, marking a slight decrease of 90 to 30 basis points compared to the previous year. The company noted that it would start to incrementally factor in contributions from its new contract with the United States Postal Service (USPS) in the second half of the year.
In light of the expected revenue growth, albeit conservative, and the anticipated benefits from the new USPS contract in the latter half of 2024, Oppenheimer has decided to maintain its estimates for the current year. The firm has also enhanced its outlook for 2025, considering an approximately $1.5 billion full-year revenue contribution from the USPS contract. This optimistic projection has led to the increase in the price target for UPS shares.
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