The United Parcel Service (UPS) stock price has crashed in the past few years as the company has faced major challenges. It has dropped by over 34% from its all-time high, bringing its market cap from over $216 billion in 2022 to $125 billion.
UPS has underperformed FedEx, its biggest competitor, whose stock has jumped by 110% from its lowest point in 2022. It has also lagged behind other firms like XPO and Deutsche Post. So, is UPS a good stock to buy ahead of its earnings?
UPS stock price analysis
The weekly chart shows that the UPS share price peaked at $207 in 2022 as demand for shipping soared. It then started a strong downward trend, forming a series of lower lows and lower highs. These trendlines are converging, meaning that the stock is forming a falling wedge pattern.
A falling wedge is usually a highly bullish sign, with most of these gains happening when the two lines are about to converge. This means that the stock has more downside before the two lines of the wedge near their convergence.
The UPS stock price retested the key support at $122.58, the 61.8% Fibonacci Retracement point. It has also remained below the 50-week and 100-week Exponential Moving Averages (EMA).
Another positive catalyst is the UPS stock forming a bullish divergence chart pattern. The Relative Strength Index (RSI) has continued rising and moved slightly above the neutral point of 50. The two lines of the MACD indicator have continued rising and are about to form a bullish crossover above the zero line.
The medium-term outlook for the UPS stock price is bullish, with the next point to watch being at $175, the 23.60% retracement level. Such a move would imply a 30% upside from the current level. A drop below the support at $122 will invalidate the bullish view.
UPS earnings ahead
The next important catalyst for the UPS stock price will be the fourth-quarter earnings scheduled for later this week.
The most recent results showed that UPS revenue rose to $22.2 billion in the third quarter from $21.1 billion in the same period a year earlier. This growth happened as the company experienced higher volumes across most of its segments.
UPS’s US domestic segment made $14.4 billion and its operating profit of $898 million. The international and supply chain solutions revenues ros by 3.4% and 8%.
Analysts expect the upcoming results to show that its fourth-quarter revenue rose by 2% to $25.4 billion, bringing the annual total to $91.22 billion. UPS is expected to make $95 billion, while the earnings per share (EPS) rising from $7.49 this year to $8.77.
Read more: Cramer: UPS stock is ‘hard to own’ after selling Coyote Logistics to RXO
UPS is growing its healthcare industry
These results will let the company provide more information about its healthcare business. It recently completed the buyout of Frigo-Trans and BPL as it seeks to become a large player in the healthcare logistics industry. Frigo owns temperature-controlled warehouses in the US and Europe.
The healthcare logistics industry is more complex but more profitable since customers, including the US government, are willing to pay a premium. As a result, the company aims to double the heallth business from $10 billion annually by 2026. Its margins are in the high teens, much higher than its traditional business.
UPS has also built large facilities near the top transport hubs in the US, and according to Bloomberg, health companies have already locked them fo over ten years.
UPS hopes that this segment will help it to offset its slowing parcel business as more customers avoid same-day or overnight shipping options.
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