A UPS driver gets into his truck in San Francisco, Calif., on July 30, 2020.Justin Sullivan/Getty Images
United Parcel Service Inc UPS-N projected 2022 revenue above market expectations and doled out its biggest dividend boost on Tuesday, as the logistics giant posted record annual earnings on the back of a pandemic-driven surge in online shopping.
Shares in the company jumped 15 per cent to a record high of $233.23, as UPS capped 2021 with double-digit revenue growth across all units and consolidated operating margins touching 14-year highs.
Under Chief Executive Officer Carol Tome, who took charge in June 2020 when the COVID-19 pandemic raged, the world’s largest parcel delivery service adopted a “better, not bigger” strategy.
It prioritized lucrative deliveries over volume and courted customers generating more revenue and profits, such as health care firms and small and medium-sized businesses (SMBs).
“2021 was an outstanding year for UPS,” Chief Financial Officer Brian Newman said on a call with analysts on Tuesday.
Average daily volumes with SMBs grew 18 per cent in the United States despite higher prices, while business with Amazon.com – its largest customer – also notched a healthy jump.
The e-commerce behemoth’s contribution to UPS’ total revenue rose to 11.7 per cent in 2021, above pre-pandemic levels, even as concerns lingered over Amazon’s development of its own logistics network.
“We have a great relationship with Amazon, and we have mutually agreed about the volume that we should take and the volume that they should keep that works best for both companies,” Tome said.
Much like other industries, UPS and rival FedEx have been grappling with supply chain challenges and rising Omicron cases among their staff.
However, UPS managed to expand operating margins to 13.5 per cent in 2021. It expects to increase that to 13.7 per cent in 2022, a year earlier than anticipated, helped by lowering costs through automation and higher volumes.
The Atlanta based-company hiked its quarterly dividend by 49 per cent year-over-year to $1.52 per share.
The company in 2022 expects to spend $5.5-billion, with 60 per cent of the amount earmarked for growth projects such as adding RFID tags on packages and purchasing electric vehicles, and 40 per cent towards fleet maintenance.
It also forecast a 2022 revenue of about $102-billion, above the Refinitiv-IBES estimate of $100-billion.
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