United Parcel Service (UPS.US) reported better-than-expected profits in the third quarter. Analysts are asking: Is this a rebound or a trap?

United Parcel Service (UPS.US) stock price showed strong performance on Tuesday. The logistics giant's third-quarter financial report, released prior to this, showed an improvement in profitability after implementing large-scale layoffs and efficiency enhancement restructuring measures. By the closing bell, UPS shares closed up 8%, reaching a new high since late July. Evercore ISI analyst Jonathan Chappell warned investors that expectations for UPS's financial report were extremely low. He pointed out that the reported earnings per share were $1.74, higher than the market's expectation of $1.30, but this data is misleading as it includes post-sale leaseback gains. Chappell stated that core adjusted earnings per share exceeded expectations by $0.15, showing solid performance, benefiting from the improved profitability of the two main business segments - domestic and international. He emphasized, "The increase in domestic profit margins will significantly alleviate market concerns about price competition and the slow response of sales to cost declines." Wells Fargo & Company analyst Christian Wetherbee believes that, against the backdrop of low expectations, the company's earnings exceeding expectations is a positive for the entire parcel delivery sector, but there are still multiple adverse factors that may hinder its full recovery. Jefferies Financial Group Inc. analyst Stephanie Moore pointed out that investors in UPS are generally aware of the many challenges the company has faced in recent years, including slowing demand post-pandemic, difficult contract negotiations with truck driver unions, declining business from major clients, and the current impact of trade wars. Moore stated, "We have spent a lot of time over the past year explaining the extreme negative sentiment facing UPS shares and defending the recent gap-down in stock prices." Given the better-than-expected core performance in domestic business in the third quarter and higher-than-expected outlook for the fourth quarter, Jefferies Financial Group Inc. expects a rebound in stock prices. Morgan Stanley analyst Brian Ossenbeck believes that the company's performance exceeded expectations this quarter and expects the stock price to outperform the market, which is completely the opposite of last year - when the company's stock performance lagged significantly behind the market due to the decline in the USPS network density and accelerated decline in Amazon.com, Inc.'s business. Morgan Stanley analyst Ravi Shanker, on the other hand, remains cautious, warning investors not to chase shorts covering causing short-term gains. He believes that the structural profitability pressures facing the company are difficult to conceal despite the performance in the third quarter and guidance for the fourth quarter. Seeking Alpha analyst Ragmar Rikberg stated that as the world's largest logistics company, UPS's current stock price is attractive. He noted that while the company faces challenges internally and externally, its long-term vision remains solid. "Once these persistent struggles are resolved, we will see a very stable company, with valuation multiples should be higher than current levels," he concluded.