Why United Parcel Service (UPS) Stock Skyrocketed This Week
Key Points
UPS reported a better-than-expected quarter, handily beating estimates on its top and bottom lines.
The company is in the midst of a turnaround; the quarter showed its efforts are working.
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Shares of United Parcel Service (NYSE: UPS) are jumping this week, up 10.3% as of 2:36 p.m. ET on Friday. The move comes as the S&P 500 has gained 0.7% and the Nasdaq-100 2%.
The delivery and logistics company reported its Q3 numbers this week, topping consensus estimates from Wall Street. The company also announced it has laid off a significant amount of its workforce as part of its cost-cutting measures.
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UPS beats consensus targets
Despite a year-over-year decline in both sales and net income, UPS still outperformed expectations. The company reported adjusted earnings per share (EPS) of $1.74 on $21.4 billion in revenue. Consensus estimates were $1.30 and $21.4 billion, respectively.
UPS is in the middle of a full-scale turnaround after years of stagnant sales growth and plummeting EPS. As part of its efforts to stem losses and cut costs, the company says it has laid off 48,000 employees this year so far. CEO Carol Tomé said this is "the most significant strategic shift in our company's history," adding that "the changes we are implementing are designed to deliver long-term value for all stakeholders."
UPS may deliver
The layoffs are a bit of a gamble. If the company's delivery times suffer, the savings could easily be outweighed by a drop in sales. At least at this point, however, it seems to be working. I think UPS could be a good pick, but the turnaround will take time and the road will be bumpy.
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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends United Parcel Service. The Motley Fool has a disclosure policy.
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