United Parcel Service Inc. share prices increased the maximum since the middle of 2020 after robust deliveries. Higher prices spurred the company to forecast higher earnings that exceeded analysts’ expectations.
As per Bloomberg News, UPS has projected revenue of $102 billion for 2022 and adjusted operating margins of 13.7%. The company had not expected to reach these figures before 2023. The analyst expectation for 2022 was $100 billion.
After taking over in June 2020, CEO Carol Tome has preferred better profit margins than more volumes. This meant increasing prices and focusing on small customers who usually do not get discounts negotiated by bigger customers.
In a statement on Tuesday, Tome said that the company execution strategy was to deliver positive results and drive momentum in 2022.
The adjusted earnings in the fourth quarter were $3.52 a share compared to analysts’ average estimate of $3.10 per share as per data compiled by Bloomberg. Sales increased to $27.8 billion, up by 12% against Wall Street expectations of $ 27.1 billion.
UPS stocks jumped by 13% at 9.45 am in New York Tuesday, topping S&P 500 index. The shares climbed 15% intraday high since July 2020. This year till Monday, UPS had dropped by 5.7% while S&P 500 declined 5.3%.
UPS faced increased expenses on account of hiring seasonal workers and keeping employees safe during the pandemic. The courier company successfully countered the U.S. labor shortage as it, unionized warehouse workers and drivers, to earn more in the parcel industry. The approach helped the Atlanta-based UPS achieve an on-time delivery performance of 97% as per ShipMatrix. FedEx achieved 88% during the peak holiday season.
The company’s domestic unit is in the U.S. which saw sales rise by 12% in the quarter, helped by an 11% increase in revenue per parcel. International Sales increased by 13%, with revenue per piece growing by 16% even though volume fell.
UPS adjusted profit margins, which were declining before the pandemic, saw a boom in eCommerce and spurred more deliveries to homes. It surged to 14.2% in the fourth quarter, up from 11.5% in the previous year same period.
In a conference call with analysts, Tome said that the total revenue of UPS included 11.7% from its biggest customer, Amazon Inc., last year. This was lower than 13.3% in the year 2020 as rising in online shopping was seen due to lockdown but was aligned to 2019 results.
This year UPS stands for gain from more business activity and return of office workers when Covid-19 restrictions ease. Business parcels are more profitable than residential ones as drivers travel less while delivering between customers. They drop more packages at each commercial destination stop.
UPS raised its quarterly dividend payout by 49% to $1.52 a share. It plans to buy back at least $1 billion worth of shares in 2022. The capital expenditure for 2022 projected by UPS is $5.5 billion in2022, while analysts expected $4.96 billion.
