UPS Down Post Disclosure of Financial Details of Labor Deal
Shares of United Parcel Service UPS declined 2.69% on Sep 12 to $156.57 per share. The downside declined 2.69% on Sep 12 to $156.57 per share. The downside followed the management’s revelation of financial impact of the labor deal with International Brotherhood of Teamsters. The five-year deal aimed at bettering pay and working conditions for the unionized workers was approved last month
Per management, due to this deal wage and benefit costs will increase at a 3.3% compound annual growth rate for the next five years. A high proportion of the cost is likely to be booked in the first year of the contract, which expires in August 2028. Following the deal, contract-related costs in the second half of the current year are anticipated to be about $500 million more than UPS’ expectation. Per UPS’ Chief Financial Officer Brian Newman, the deal will cost less than the $30 billion.
To combat the lackluster demand scenario and an uptick in labor costs, UPS is looking to cut total expenses through various avenues. To this end, management recently offered early retirement to some pilots. The weak freight market has hurt overall volumes.
Due to these headwinds, UPS shares have declined 2.6% year to date against its industry’s 3.4% growth.
Image Source: Zacks Investment Research
Zacks Rank & Key Picks
UPS currently carries a Zacks Rank #4 (Sell).
Investors interested in the Zacks Transportation sector may consider stocks like Air Transport Services Group ATSG and Air Canada ACDVF. While ATSG currently sports a Zacks Rank #1 (Strong Buy), ACDVF carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
An uptrend with respect to e-commerce, even in the post-pandemic scenario, is a huge positive for Air Transport Services. It is the primary driver behind an uptick in demand for midsize air freighters.
Driven by the upbeat demand, ATSG delivered a record six converted freighters under lease in a month to its customers worldwide. The Zacks Consensus Estimate for ATSG’s current-year earnings has been revised 11.2% upward over the past 60 days.
Air Canada is being aided by an uptick in passenger traffic. Recently, the company announced plans to launch a new year-round route between Montreal and Madrid. The service will be commencing in May of the following year, as part of its expanded international summer 2024 flying schedule to cater to increased demand.
The Zacks Consensus Estimate for current-year earnings has surged 57.1% over the past 60 days. ACDVF has outshined the Zacks Consensus Estimate in two of the past four quarters (missing the mark in the other two).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
United Parcel Service, Inc. (UPS) : Free Stock Analysis Report
Air Transport Services Group, Inc (ATSG) : Free Stock Analysis Report
Air Canada (ACDVF) : Free Stock Analysis Report
