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UPS shares fall as investors fret over post-pandemic growth plan

Kitco News

United Parcel Service Inc (UPS.N) shares fell as much as 6% on Wednesday as the company known for delivering everything from Amazon.com packages to coronavirus vaccines laid out plans for post-pandemic growth.

During the company's analyst day on Wednesday, executives at the world's largest parcel delivery firm said they are prioritizing lucrative deliveries over volume.

They issued growth forecasts largely in line with Wall Street estimates and said UPS is fighting to win more contracts with healthcare firms and small and medium-sized businesses (SMBs). At the same time, the Atlanta-based firm is corralling costs on key projects, including expanding Saturday deliveries across the United States.

The company forecast 2023 adjusted operating margin ranging from about 12.7% to 13.7%.

About half of the margin expansion in the company's core U.S. market would be generated this year via price increases and increased business from SMBs, executives said.

UPS shares have nearly doubled over the last year - fueled by surging pandemic-related shipments of everything from food and furniture to medical masks and vaccines.

They were down 4.7% at $199.88 in afternoon trading after dropping as low as $197 earlier in the session, when analysts were pressing executives on how UPS will maintain momentum as demand moderates, pandemic surcharges roll off, and competitors - including its No. 1 customer, Amazon.com Inc (AMZN.O) - rise.

"Not all packages are attractive to us," Chief Executive Carol Tome said.

Healthcare deliveries, including temperature-monitored shipments from companies like vaccine maker Pfizer Inc (PFE.N), are among the most profitable in the business. SMBs are more attractive because clients can require a higher level of service and tend to lack the muscle of large firms like Amazon to negotiate volume discounts.

Executives said its weekend delivery push uses existing infrastructure and that they are "looking" in to a same-day delivery service.

UPS forecast revenue between $98 billion and $102 billion for 2023, compared with the average analyst estimate of $100.19 billion, according to Refinitiv data. It reported full-year revenue of $84.6 billion in 2020.

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