United Parcel Service, Inc. (NYSE: UPS) is trading off after the company reported poor earnings this morning. There is an interesting angle here that could reflect on Amazon.com Inc. (NASDAQ: AMZN) ahead of its earnings reporter after today’s close. Almost everyone uses Amazon.com at some point now, but which shipping package do you just about always see when you buy through the Amazon.com retail network? UPS, of course. Amazon’s digital operations can be a real wild card today, but the possible correlations are just too hard to miss.
UPS missed earnings by $0.04 at $0.52 EPS and revenues were down more than 13% at $10.94 billion. Estimates were $0.56 and $11.44 billion in sales. UPS also guided lower for a difficult second quarter of $0.45 to $0.55 EPS vs. $0.65 consensus. More importantly, the company put a recovery in the U.S. late this year, but more likely not until 2010. The notion that it did not win with DHL coming off the market only brings more focus on the shipping sector. In short, UPS might even be worse if you compare its internals sans-DHL benefits.
Where this gets interesting at UPS is that shipping volume was down 4.3%, and the actual weight declined an average of about 15%. So you have lower volumes, and you also have smaller or at least lighter objects being shipped. Consolidated average daily volume dropped by 3.9% to 14.54 million packages, and the average revenue per piece dropped by 6.9%.
With Amazon.com set to report earnings after the close of business today, we have to consider a parallel here between revenues declining at UPS and expected to rise at Amazon. Thomson Reuters has estimates at $0.31 EPS and $4.76 in revenues. Revenues for Q1-2008 were $4.135 billion, so today’s estimates would represent a gain of 15% in revenues.
We are not sure if Jeff Bezos will try to offer long-term guidance or not. The estimates for Q2-2009 are $0.30 EPS and $4.61 billion in revenues (est. is a 1% gain over Q2-2008) and estimates for fiscal 2009 are $1.50 EPS and about $22 billion in revenues (est. is for 14% revenue growth over all of 2008).
We cannot draw a direct line between the Amazon numbers and the UPS numbers, particularly since the UPS call was ongoing while we wrote this. But it is impossible to not notice a possible correlation. There is a very possible wild card here at Amazon that was not there before, and that is in the digital media side of Amazon’s business. This has been there before, but not the extent of today and that will only grow ahead. Amazon now has the Kindle e-book reader and it also owns the Audible.com operation for media distribution. The digital deliveries require zero shipping via UPS or any other shipping operation.
Amazon.com shares are also up close to 35% from the lows of early March. The most recent short interest figures show that Amazon.com has over 26.2 million shares in the short interest. It also looks like options traders are braced for a move of up to about $6.00 or $6.50 in either direction. We would also like to point out that Amazon is very far above all of its key long-term moving averages. The 50-day moving average is $70.15 and the 200-day moving average is $63.90.
As far as how these stocks are performing, they are in the opposite direction. UPS shares are down 6% at $51.45, and its 52-week trading range is $37.99 to $74.14. Amazon.com shares are up 2.6% at $81.30, and its 52-week trading range is $34.68 to $91.75.
JON C. OGG
Top Gaining Stocks
Top Losing Stocks