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UPS shares took a big hit on Tuesday, after posting lower-than-expected quarterly earnings and cutting its full-year outlook amid an economic slowdown.
While most agree the 105 year old company, which moves millions of packages between consumers and businesses every day, can survive a weaker economy, analysts disagree over whether investors will soon see returns.
"They don't expect the traditional fall restocking we normally get in August and September in the U.S.," said Jeffrey Kauffman, managing director at Sterne Agee, who has a "buy" rating and $110 price target on UPS.
Kauffman argues that taking down the full-year forecast was a smart, protective move while businesses cut back.
"They're getting out ahead of the curve and saying listen, we'll take down our capacity, batten down the hatches. But they are still throwing off almost $3 a share in free cash flow and their earnings growth is still going to be pretty strong," Kauffman told CNBC's "Squawk on the Street."
Kauffman expects UPS to post stronger profits as it heads into the fourth quarter, which is also when the company expects to close on its biggest takeover in its history, the purchase of Dutch company TNT Express. Kauffman predicts the acquisition will start adding to earnings by 2013.
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