This morning, package-delivery firm United Parcel Service (UPS) released its second-quarter earnings report. The company's adjusted diluted earnings per share came in at 49 cents per share, compared to 85 cents per share a year ago, matching the consensus estimate. Revenue came in at $10.8 billion, which is also lower than a year ago when the company brought in $13 billion.
Looking ahead, UPS reiterated its forecast for third-quarter earnings between 45 and 55 cents per share. This range is slightly short of the Street's expected earnings of 59 cents per share. The company's CEO Scott Davis noted that the overall economic environment pressured the company's performance; nevertheless, UPS "remains financially very strong." Davis added that the company will "continue to invest in growth opportunities," and that UPS is a "company that can weather this recession."
UPS's earnings, in conjunction with rival FedEx (FDX), are often seen as an indicator of U.S. economic activity. In its recent earnings report, FDX predicted that the next two quarters would be "extremely difficult." Judging by UPS's slightly lower than expected forecast, it seems that the company thinks that the coming quarter will provide a challenge.
Technically, UPS faces an uphill battle. The shares face overhead resistance from their 10-month moving average, which has pressured the stock lower since May 2008 (the last time UPS closed atop this trendline). The equity does have potential support in place in the $46 region, which has provided a bouncing board for UPS in the past. A weekly chart of UPS is a bit more encouraging, although there is one major caveat. UPS is riding along the support of its 10- and 20-week moving average, which have acted as resistance in the past. The problem is that the stock's 50-week moving average looms directly overhead. UPS has closed above this trendline less than five times since May 2008, and it appears that this moving average will provide a rather substantial roof over the stock.
Can UPS turn around its technical performance? Yes, but it may take some time (just like the delivery of some packages from "brown"). It will take a series of good news and solid earnings reports to instill confidence in UPS, but that is no different than with most of the companies in America. The question is, will UPS lead the economy higher or will it follow?
Understanding Stock Market Indexes
What does it mean when people say "the market is up 2%"?View Course »