Will United Parcel Service (UPS) Miss Q3 Earnings Estimates?

United Parcel Service, Inc. (UPS) is slated to report its third-quarter 2014 results on Oct 24, before the opening bell.

Last quarter, United Parcel Service reported a negative earnings surprise of 2.4%. Let’s see how things are shaping up for this announcement.

Factors at Play

United Parcel Service is optimistic about witnessing growth across most of its businesses. In the U.S. domestic package, the company expects average daily volumes to grow in the range of 4–5% in 2014. Revenues are expected to improve at a slightly faster pace than volume. International package segment is expected to remain positive with export average daily volume growth ranging from 4–6% in 2014.

United Parcel Service also expects earnings growth to be affected by the higher tax rate and disruption in the supply chain and freight segment due to weakness in the freight forwarding business unit. In addition, the company expects operating expenses to increase by $100 on accelerated deployment of the ORION project. This should impact third-quarter earnings by 3 cents.

Earnings Whispers?

Our proven model does not conclusively show that United Parcel Service is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here, as you will see below.

Zacks ESP: United Parcel Service has a negative earnings ESP of -0.78%. This is because the Most Accurate estimate stands at $1.27 while the Zacks Consensus Estimate is pegged higher at $1.28.

Zacks Rank: United Parcel Service carries a Zacks Rank #4 (Sell). We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

Here are some companies that have the right combination of elements to post an earnings beat this quarter:

Atlas Air Worldwide Holdings, Inc. (AAWW) has an earnings ESP of +8.14% and carries a Zacks Rank #1 (Strong Buy).

CSX Corp. (CSX) has an earnings ESP of +2.08% and carries a Zacks Rank #2 (Buy).

LATAM Airlines Group S.A. (LFL) has an earnings ESP of +12.50% and carries a Zacks Rank #3 (Hold).