By Christiana Sciaudone
Investing.com -- UPS shares fell 5% on Wednesday after the company said costs rose along with demand.
Third quarter earnings per share of $2.28 beat the estimated $1.88 on sales of $21.2 billion, higher than the expected $20.2 billion.
But domestic operating profit of $1.13 billion was lower than last year's $1.24 billion third quarter profit as expenses came in higher than expected.
United Parcel Service Inc (NYSE:UPS) cited accelerated initiatives to expand weekend operations and speed up the ground network, benefit expenses for new employees, and lower productivity gains than planned and lower delivery density.
Sales were 16% higher than a year earlier, with average daily volume up 14%. Profit increased year-over-year by 12%.
Investors may not have been impressed, but UBS was. Analyst Thomas Wadewitz upgraded the stock to buy from neutral and raised 2022 EPS estimates. He boosted the price target to $214 from $162.
“UPS has already initiated an employee buyout program and we expect further meaningful cost takeout actions from their Transformation 2.0 and 3.0 programs," Wadewitz said, according to StreetInsider. "While the cost actions could support upside in 2021, we expect a more fulsome impact in 2022.
UBS also sees a case for stronger pricing next year.
Rival FedEx Corporation (NYSE:FDX) fell 4%.