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united parcel service (NYSE:UPS) has exciting long-term goals, but the short-term outlook isn’t as bright. Investors are focused on what’s at hand, with UPS stock down nearly 8% as of 1:30 p.m. ET.
speed increases in front
Investors went into UPS’s annual investor day with high expectations, and the company released some eye-catching predictions. The shipping giant raised its 2026 revenue target from $108 billion to $114 billion and said it expected adjusted operating margins to be 13% by then.
For comparison, the company generated $91 billion in revenue in 2023. Wall Street’s consensus forecast for 2026 was $101 billion.
Questions about the economy and consumer health have led large customers to reduce inventory, creating a bleak environment for shippers. UPS has warned that this quarter will be its “toughest” quarter of 2024, saying profits will likely fall 40% from a year ago. The company responded by aiming to cut costs aggressively.
“The small package industry is poised to emerge from a difficult market in 2023 and return to growth in 2024 and beyond,” CEO Carol Tomé said in a statement. “Over the next three years, we plan to take bold actions to create a flywheel of growth in the premium market while driving higher productivity and efficiency.”
Will UPS be a buy based on Investor Day predictions?
UPS stock has fallen 22% over the past year and is down nearly 40% from its pandemic highs, when shipping was the only means to keep the retail economy afloat.Some of the decline is cyclical, but the stock has underperformed its biggest rivals fedex It increased by 22 percentage points by 2024 and by more than 50 percentage points in the past year.
FedEx stock has recently rebounded as management was able to reassure investors that its cost-cutting campaign is working. UPS remains a “prove” story for investors based on comments over the coming months. There’s a lot of potential here, but management needs to show progress before the stock explodes.
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Lou Whiteman has no position in any stocks mentioned. The Motley Fool has a position in and recommends FedEx. The Motley Fool recommends United Parcel Service. The Motley Fool has a disclosure policy.
The article Why United Parcel Service Inventory Is Soaring Today is published by The Motley Fool.
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