Q2 Preview: Lagging UPS (UPS) May Be Buying Opportunity Ahead of Results

United Parcel Service (NYSE: UPS) has been in negative territory for most of the session today ahead of its second-quarter earnings report, expected out after the market closes.

Expectations call for earnings of $1.04 per share on revenue of $13.14 billion. Earnings would be a 18.2 percent increase over the first-quarter, and 24 percent gain from the same period last year.

The Atlanta, GA-based shippers stock slipped about 1.2 percent, no doubt due in part to the rise in crude prices. Shares are up 1.5 percent since the end of the quarter, and 3.4 percent on the year.

When looking at United Parcel, it makes sense to see what FedEx (NYSE: FDX) did in its quarter. In this case, FedEx issued a beat-and-raise for its fourth-quarter; earnings were $1.75 per share on revs of $10.55 billion, both beating the consensus. FedEx also issued strong guidance for fiscal 2012. It's Freight segment saw a 13 percent increase in less-than-truckload (LTL) yield.

Data from Bloomberg has 21 analysts with a Buy, eight at Hold, and none suggesting to Sell. The analyst price target average is $89.50, with a low of $70 and high of $104. UPS has traded in a range of $62.61 to $77.00 over the last 52-weeks.

Analyst Commentary

• Goldman Sachs is bullish on UPS into the quarter, expecting a beat-and-raise out of the Company. Goldman is looking for earnings of $1.10 per share. Goldman also pointed out that UPS lagged FedEx by 2.4 percent and the S&P 500 by 0.3 percent since the start of the second quarter. UPS also has beat expectations over the last seven quarters, and hasn't missed in nine quarters.
  
  
• JPMorgan notes that freight demand data points to a soft quarter for UPS, but FedEx results and moderating fuel prices may provide upside into the quarter. The firm is looking for EPS of $1.06.
  
  JPMorgan sees second-quarter air express yield growth of 7.7 percent and ground yield growth of 5.5 percent. Commenting on recent data checks: "heavyweight airfreight data was either about flat (IATA) or down (HACTL) y/y in 2Q11 while ocean container volume growth decelerated in 2Q. U.S. industrial production growth in 2Q11 was less that we had assumed in April which also provides a cautious read to UPS’s Ground volumes."

Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of their release.

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