UPS Earnings Beat Expectations. Why the Stock Is Tumbling. -- Barrons.com
Al Root United Parcel Service stock is falling after the shipper reported solid second-quarter results Tuesday morning. While earnings were fine, good jus isn't good enough anymore for investors.The company earned $3.06 a share from $23.4 billion in sales, beating analyst expectations for $2.83 a share on $23.2 billion in sales. Sales grew 14.5% year over year, while operating profit jumped 47.3% year over year.Still, UPS (ticker: UPS) Shares are down 8.3% Tuesday. The S&P 500 and Dow Jones Industrial Average, for comparison, are down about 0.6% and 0.5%, respectively.It's another earnings beat for the company in a long line of earnings beats. From the second quarter of 2020 to the first quarter of 2021, UPS beat analyst earnings projections each time by an average of about 50%. It's fair to say investors have become inured to UPS earnings beats.And this beat came nowhere near previous ones as analysts finally catch up to the trends that made 2020 so good. Covid-19 caused a big shift to online shopping, which benefited UPS as well as its peer FedEx (FDX). Now the better business environment is baked into existing analyst projections. Tuesday's results exceeded analyst expectations by about 8%.And strong recent results are reflected in UPS share price too. Shares have gained 58% over the past 12 months. The S&P 500 is up about 37% over the same span.What's more, UPS shares trade for about 18 times estimated 2022 earnings. The 18 times multiple is a discount to the 20.5 times multiple of the S&P but a premium to the UPS average of the past few years of about 16 times.A Tuesday dip doesn't mean UPS stock is doomed. A quarter of "beat and drop" is not all that uncommon. And Wall Street still likes the stock. About 58% of analysts covering the company rate shares Buy. The average Buy-rating ratio for stocks in the S&P is about 55%. The average analyst price target is about $220 a share, a little higher than where the stock currently trades.Now, it's just wait and see.