UPS Delivers Big Time

Share price leaps 15% on strong momentum, dividend hike

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Feb 02, 2022
Summary
  • Q4 revenue up 11.5% year-over-year
  • Quarterly dividend raised by 50 cents
  • CEO Carol Tome: ‘driving strong momentum as we move into 2022’
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United Parcel Services Inc. (

UPS, Financial) delivered smiles to investors everywhere on Tuesday, reporting powerful fourth-quarter 2021 results. Consolidated revenue was $27.8 billion, an 11.5% jump over the fourth quarter of 2020.

Consolidated operating profit for UPS was $3.9 billion, up 91.0% compared to the fourth quarter of 2020 and up 37.7% on an adjusted basis. Diluted earnings per share were $3.52 for the quarter, which was 35.0% above the same period in 2020.

GAAP results included a total charge of $59 million, or $0.07 per diluted share, comprised of a non-cash, after-tax mark-to-market pension charge of $14 million and after-tax transformation and other charges of $45 million.

Investors were encouraged by UPS’ strong performance and bid the stock price up more than 15% shortly before on Tuesday to $233.50 a share. The stock was on pace for the best day since July 2020, according to Dow Jones Market Data. It finished the trading day at $230.79 before beginning to pull back slightly the following day. Shares of UPS gained 30% in 2021.

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The company also said it is raising its quarterly dividend to $1.52 a share, up from $1.02.

Like FedEx (

FDX, Financial) and the United States Postal Service, UPS has benefitted from the flood of package volume since the beginning of the Covid-19 pandemic, as online buying gained ground against brick-and-mortar shopping trips.

“I want to thank all UPS-ers for their outstanding efforts throughout the holiday season and for once again delivering industry-leading service to our customers.” said Carol Tome, the CEO of UPS, in a statement. “The execution of our strategy is delivering positive financial results and driving strong momentum as we move into 2022.”

UPS is one of the world’s largest transportation and delivery companies with full-year 2021 revenue of $97.3 billion. It provides a broad range of integrated logistics solutions for customers in more than 220 countries and territories.

In the U.S. Domestic segment, revenue was up 12.4%, for the year, driven by a 10.5% increase in revenue per piece. The operating margin was 11.9%, while the adjusted operating margin was 12.2%.

Internationally, revenue increased 13.1%, driven by a 16.4% increase in revenue per piece. The operating margin was 24.6%, while the adjusted operating margin was 24.7%.

UPS executives said they expect to deliver their 2023 consolidated revenue and operating margin targets one year early. For the full-year 2022, the company expects consolidated revenue of about $102 billion, an adjusted operating margin of approximately 13.7% and adjusted return on invested capital to be above 30%.

The company is planning capital expenditures to be 5.4% of revenue (or approximately $5.5 billion), dividend payments to be around $5.2 billion (subject to Board approval) and share repurchases to be at least $1.0 billion. The effective tax rate is expected to be around 23.0%, according to the release.

“A couple of years ago, that [SME] volume was low-20% in terms of the volume of U.S. business,” Chief Financial Officer Brian Newman said during a Tuesday conference call. The SME mix has risen to about 26% of U.S. volumes during the past year.

“Newman said improvements in factors such as on-time delivery and the adoption of technology making it easier to interact with UPS have driven those gains," Barron’s reported. “UPS hasn’t lost sight of the cost side of the equation either. Rising wages and supply-chain problems didn’t derail the quarter even as Tome characterized the operating environment as ‘challenging.’”

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I/we have no positions in any stocks mentioned, and have no plans to buy any new positions in the stocks mentioned within the next 72 hours. Click for the complete disclosure
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