UPS reports record profit but forecasts a slower 2023
UPS reported a record profit for 2022 as its revenue reached $100 billion for the first time since its founding in 1907.
The company said Tuesday it earned $3.2 billion in the fourth quarter, little changed from a year ago and slightly better than analysts surveyed by Refinitiv were expecting. But it was enough to lift full-year earnings to $11.3 billion, up from what had already been a record, of $10.7 billion, a year ago.
The company has enjoyed three years of rapid growth as online shopping surged during the pandemic. In 2019, the year before the pandemic began, UPS reported revenue of $74.4 billion, and adjusted income of $6.5 billion.
That means annual revenue is up 11%, on average, each year since the start of the pandemic, while earnings rose about 20% a year.
That’s good news as UPS is a proxy for both domestic and global economies, carrying an estimated 2% of the world’s gross domestic product and 6% of the US GDP each day.
But those three years of double-digit growth may be in the past, or at least on hold. UPS is one of several companies, from pharmaceuticals to online retailers, who experienced a Covid-19 boom in business that may be tailing off.
Revenue in the fourth quarter fell 3% to $27 billion, even as full-year revenue climbed 4.5% to the $100.3 billion. And the company warned it expects slightly lower revenue and tighter profit margins for 2023.
Still shares of UPS were up about 5% in midday trading on its solid earnings report.
Worries about economic, labor talks
With fears that 2023 could bring a global or US recession, there had been something of an overhang on the stock, despite the strong recent earnings. UPS shares are down about 20% over the last twelve months, through Monday’s close.
Also overhanging the stock are concerns that UPS could face a strike later this year by the Teamsters union, which represents more than 325,000 UPS employees, making it the nation’s largest unionized workforce of any business. The union contract expires on July 31.
UPS CEO Carol Tome tried to downplay the strike threat when asked about it during a call with analysts Tuesday.
“The Teamsters have been part of the UPS family for more than 100 years. So over 10 decades, we’ve negotiated many, many contracts. This is not our first rodeo,” she said. She insisted the company will be be to find a common ground in negotiations that will be a win for the company, its employees and its customers.
“We’re not far apart,” she said. “We’re going to do the right thing for our people.”
Still, the existing contract was put in places despite opposition from the majority of rank-and-file who voted in the ratification election. Opposition to that contract and ratification vote was a major issue in the election of Sean O’Brien as its new president. While O’Brien says the union doesn’t want a strike he says its membership is prepared to do what it takes to get a better contract this time around.
“Do our members wake up every day wanting a strike. I’d say no. But are they fed up? Yes they’re fed up,” O’Brien told CNN Business in September. “Whether or not there is a strike, that’s totally up to the company. We’re going to utilize as much leverage as we can to get our members the contract they deserve.”
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