If UPS’s impressive fourth-quarter earnings report Tuesday morning is any indication, its main customer Amazon Wall Street could be a nice surprise with its post-closing revenues.
The logistics giant – which depends on Amazon (AMZN) for about 11% of its annual revenue – blew analysts’ revenue and profit expectations. Each UPS business segment posted better-than-expected sales as people worldwide ordered holiday gifts online during the COVID-19 pandemic.
Sales at UPS’s domestic and international businesses (UPS) increased 17.4% and 26.8% year-on-year, respectively. Both segments improved profit margins from a year ago.
“Demand patterns have changed a lot, with e-commerce sales reaching about 21% of total retail sales. We don’t think that will change if we look ahead. So we expect continued penetration into our business-to-consumer businesses, ”UPS CEO Carol Tomé told Yahoo Finance Live on Tuesday.
Shares of UPS were up nearly 4% on Tuesday during early afternoon trading.
The worst performing FAANG stock
Strangely enough, Amazon’s stock price doesn’t seem to reflect its strong potential for a great fourth quarter and optimistic outlook.
Amazon stock has hit a paltry 5.6% in the past six months, lagging behind the 17.5% gain of the S&P 500 and Nasdaq Composite’s 27% gain. According to data from Yahoo Finance Premium, the stock was the worst-performing member of the FAANG cohort (Facebook, Amazon, Apple, Netflix, Google) in the past six months.
“Amazon was probably one of the main beneficiaries of accelerating e-commerce growth during the fourth quarter as investment in logistics increased its competitive advantage over players who relied more on 3P carriers. While a strong holiday season is a positive indicator for 4Q20 and 2021, difficult compositions remain the main debate for the stock, ”said Jefferies analyst Brent Thill in a note explaining the stock’s recent weakness.
But if Amazon performs well on its earnings day, it could easily revive the bullcase on the stocks. That case is rooted in the growing dominance of the retail industry amid the pressure of online shopping and the power of Amazon Web Services (AWS).
“We believe Amazon’s retail sales remain healthy globally, with a robust Prime Day in October supporting strong retail sales growth and margin improvement (retail margins in North America and internationally were both positive in 3Q); Meanwhile, we continue to believe that the AWS business is in the relatively early collections of its growth potential and is likely to benefit in the coming quarters as companies look to accelerate their shift to the cloud, ”wrote Guggenheim Securities analyst Robert Drbul prior to the release of Amazon’s revenue.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSwijn and further LinkedIn.
Find the latest business and financial news here.
What’s hot about Sozzi:
Check out Yahoo Finance’s live programming at Verizon FIOS channel 604, Apple TV, Amazon Fire TV, Year, Samsung TV, Pluto TV and YouTube. Online catches Yahoo Finance Twitter, Facebook, Instagram, Flipboard, SmartNews, LinkedIn, and reddit.
Originally published