Earnings reports. The concept seems almost quaint in an investing world gone mad. Yet earnings season is once again upon us, and one of the biggest bellwethers is about to deliver its prognosis-by-proxy on the economy. UPS (NYSE:UPS) reports its Q3 numbers tomorrow morning.

What analysts say:

  • Buy, sell, or waffle? 17 analysts keep watch over UPS's outbox, giving the company five buy ratings and a dozen holds.
  • Revenue. On average, they're looking for 6.5% sales growth to $13 billion.
  • Earnings. Profits are expected to tumble 15% to $0.89 per share.

What management says:
Like the laggard of two twin peas in a pod, UPS followed FedEx's (NYSE:FDX) lead last week, upping its shipping rates about 5%. Which sheds some light on CFO Kurt Kuehn's observation last quarter that despite "slow U.S. economic activity and fuel price increases ... we anticipate that the second half of 2008 will generate modestly better results than the first half." Assuming the price hike doesn't scare off too many customers, higher prices should indeed yield higher profits.

How much higher? UPS is forecasting $3.50 to $3.70 in profits by year-end.

What management does:
Admittedly, that's not what you might expect from the margins UPS has been posting lately (take a look at that razor-thin net!). But just as soon as UPS's $6.1 billion Q4 2007 pension-related expense falls off the end of the trailing-12-month results (i.e., next quarter), I expect you'll see the net bounce right back up into the mid-single digits.






















All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Getting back to the rate increase -- because it matches FedEx's hike and, because aside from the venerable USPS, there are really no viable shipping alternatives to these two -- I don't expect a 5% price hike will hurt either company much, or spark some great growth in profits, either.

Instead, the rate hike will make itself felt elsewhere throughout the economy. For example, higher shipping costs can be expected to depress traffic on eBay (NASDAQ:EBAY) by scaring away small buyers. Conversely, Amazon.com (NASDAQ:AMZN) and Overstock.com (NASDAQ:OSTK) -- both of which do a better job of hiding their shipping costs within their goods' advertised prices -- will likely benefit from a shifting of online shopping patterns.

As for UPS and FedEx, just like the rest of us, they'll muddle through and wait for the worm to turn on this anemic economy of ours.

Further FedEx and UPS Foolishness:

Fool contributor Rich Smith does not own shares of any company named above. The Motley Fool has a disclosure policy.

United Parcel Service is a Motley Fool Income Investor pick. FedEx, eBay, and Amazon.com are Motley Fool Stock Advisor recommendations.