UPS Beats Q4 Expectations; Leadership Optimistic About Labor Negotiations
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UPS Inc. announced it beat expectations for fourth-quarter adjusted profit, as it prioritized shipments of high-margin packages. The company, in a Jan. 31 report, said it contained costs amid a softening e-commerce environment and concerns about a slowing global economy.
For the three months ending Dec. 31, UPS posted an adjusted net income of $3.15 billion, or $3.62 per share, compared with $3.15 billion, $3.59, year-over-year. The FactSet consensus for earnings per share was $3.58.
Quarterly revenue was $27 billion, down 2.7% from $28.1 billion in 2021. That figure missed analysts’ expectations of $28.09 billion.
The company attributed the decline to a softening demand and a severe winter storm that affected several U.S. shipping hubs and delayed delivery.
“I want to thank all UPSers for delivering what matters throughout the holiday season, including industry-leading service to our customers for the fifth consecutive year,” CEO Carol Tomé said. “For the year, we reached our targeted consolidated operating margin and return on invested capital goals one year earlier than originally anticipated. Our results in 2022 demonstrate our strategy is working.”
The company said that in the fourth quarter, revenue for the domestic segment, which is about two-thirds of its revenue and most business-to-customer transactions, grew 3%. Revenue from international shipping decreased 8% due to volume reductions and softening demand in China.
In her three years as chief executive, Tomé has instituted a “better, not bigger” strategy that is pushing the company toward using more digital tools to improve productivity, moving packages for more profitable businesses and avoiding those that make less profit. The company also is focusing on growing shipments of high-tech medical devices and other health care products. UPS said it will boost its overall capital spending this year to $5.3 billion from nearly $4.8 billion in 2022.
To that end, average daily package volume fell 4.5% in the fourth quarter, although revenue earned per package rose 5.2%.
With concerns over a global recession, UPS said its annual revenue in 2023 could decline for the first time in years. It expects revenue of between $97 billion and $99.4 billion, down from $100.3 billion last year.
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According to a World Trade Organization report in October, trade growth is expected to slow this year as import demand dips in several major economies, and developing nations face challenges with debt levels and food insecurity issues.
Tomé also provided an update on the status of upcoming labor negotiations with the Teamsters union, and she is optimistic an agreement will be reached with the estimated 350,000 members.
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“Teamsters have been part of the UPS family for more than 100 years, over 10 decades. We have negotiated many contracts; this is not our first rodeo,” she said. “Our approach with the Teamsters is win, win, win — a win for the Teamsters, win for our employees and win for our employees and our customers.”
Tomé said media reports indicating labor unrest are inaccurate, and she believes an agreement will be reached before the end of July, when the current pact expires.
“There have been a lot of articles recently that might cause someone to question whether a ‘win, win, win’ is achievable. But I would submit that a ‘win, win, win’ is very achievable because we are not that far apart on the issues,” she said. “Both the Teamsters and UPS agree that a healthy and growing UPS is good. Good for Teamsters, our people and good for our customers. We have added more than 70,000 Teamster jobs since 2018, and we’re aligned.”
Both the Teamsters and UPS agree that a healthy and growing UPS is good.
CEO Carol Tomé
Tomé acknowledged that customers are demanding seven-days-a-week service, and the union has expressed its concerns over its drivers and other employees working six days a week.
“To be growing and healthy, we need to be competitive and make sure our offerings meet the needs of our customers,” she said. “Teamsters have worried about the pressures placed on our workforce with weekend operations. I don’t want people working six days a week unless they want to.
“We’re aligned on this. We just need to get to the bargaining table and work it out and, candidly, we think that with a few tweaks to our existing contract, we can work this out.”
UPS ranks No. 1 on the Transport Topics Top 100 list of the largest for-hire carriers in North America.
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