On Tuesday, investors started to wonder if bullish bets on global growth might be premature after UPS voiced caution about economy.
As the world’s largest package delivery company, ’Brown’ is considered a economic barometer because its shipment trends provide insights into global demand. So it comes as no surprise that investors listen closely to what UPS says about the economic outlook. And on Tuesday it said the economic outlook was getting ‘a little muddier.’
During its earnings conference call with analysts, CEO Scott Davis also said the global economy was still recovering at an uneven pace and added that high unemployment, weak consumer confidence and U.S. debt issues are adding to the headwinds.
To make investors even more jittery, UPS said its business customers were keeping inventory thin until consumer confidence improves.
Considering UPS handles goods equal to 6 percent of the U.S. gross domestic product and 2 percent of global GDP in its trucks and planes – should you heed the company’s conservative comments and take gains on your global growth trades?
Although it's never wrong to book profits, Fast Money trader Joe Terranova remains confident that the global growth trades remain in tact.
He says before generating a trading thesis, it’s important for investors to dig down into the UPS earnings report and separate domestic results from the numbers generated by UPS’s overseas operations.
And Terranova finds overseas results bullish.
”They talked about the outperformance in Germany -- and China was so strong they’re going to add another flight into China,” he says. According to UPS CFO Kurt Kuehn, demand in Germany, France and Turkey helped boost international domestic shipments, In fact, international revenue at UPS climbed 13%.
”I don’t think investors should be concerned about global growth from these results.”
And to support his thesis he also points to the action in the railroad stocks. “The rails are still telling you growth is there.”
Trader Brian Kelly doesn’t quite agree with Terranova. After digging down into the earnings report, he didn't like what UPS had to say about the rest of Asia.
Specifically, the company said growth outside China was weaker than expected. ”The rest of Asia essentially exports goods into China and China re-assembles it. That’s a concern.”
Looking at UPS shares as well as rivals, trader Jon Najarian suggests staying away. “I’m not saying get short,” he clarifies, “but you might want to sell rival FedEx into its report. I think both of these stocks could be vulnerable.”
