Fly Intel: What to watch in UPS earnings report

UPS (UPS) is scheduled to report results of its fiscal second quarter before the market open on Thursday, July 30, with a conference call scheduled for 8:30 am ET. What to watch for: 1. GUIDANCE: When UPS reported its fiscal first quarter results on April 28, the company withdrew its fiscal 2020 revenue and earnings per share guidance. UPS said in the Q1 earnings release, “At this time, UPS is unable to predict the extent of the business impact or the duration of the coronavirus pandemic, or reasonably estimate its operating performance in future quarters. As a result, the company is withdrawing its previously issued 2020 revenue and diluted earnings per share growth guidance.” 2. FEDEX RESULTS: On June 30, FedEx (FDX) reported Q4 adjusted EPS of $2.53 and revenue of $17.4B against analyst expectations of $1.52 and $16.49B, respectively. Additionally, FedEx announced it is not providing an earnings forecast for FY21 due to coronavirus. In its Q4 earnings release, FedEx said, “Virtually all revenue and expense line items were affected by the COVID-19 pandemic during the quarter,” the company said. “While commercial volumes were down significantly due to business closures across the globe, there were surges in residential deliveries at FedEx Ground and in transpacific and charter flights at FedEx Express, which required incremental costs to serve. The company also incurred an approximate $125 million increase in operating costs related to personal protective equipment and medical/safety supplies, as well as additional security and cleaning services to protect our team members and ensure we are safely providing essential services for our customers. Additionally, operating results were negatively affected by one fewer operating weekday, increased costs to expand services, higher bad debt expense, increased self-insurance accruals and the loss of business from a large customer. These factors were partially offset by the strong residential delivery volume growth at FedEx Ground, increased revenue per shipment at FedEx Freight, a favorable net impact of fuel and lower variable incentive compensation expenses. Fourth quarter results include goodwill and other asset impairments of approximately $370 million, primarily related to goodwill impairment at FedEx Office. The COVID-19 pandemic resulted in temporary store closures and declining print revenue at FedEx Office during the fourth quarter and is expected to continue to negatively impact its near-term operating performance.” During the Q4 earnings conference call, FedEx management noted that economic outlook remains uncertain. 3. COVID-19 IMPACT: When UPS reported its Q1 results on April 28, the company announced it was suspending share buybacks for 2020. UPS said, “UPS has taken steps to ensure it remains strong and resilient throughout this period, including: The company expects 2020 capital expenditures will be reduced by approximately $1B from previous estimates. UPS is suspending share buybacks for 2020, reducing its planned full-year repurchase target by approximately $783M. “We will continue to adapt through this challenging period and prioritize investments and operational decisions that put UPS in the best financial position.” said Brian Newman, UPS’s CFO “We take a disciplined and balanced approach to capital allocation and are confident in our liquidity position including our commitments to capital management and dividends.”