UPS posts strong Q4 and calendar year 2021 earnings results

Fourth quarter and calendar year 2021 earnings results issued today by Atlanta-based global transportation and logistics services bellwether were strong amid a challenging environment.

Quarterly revenue—at $27.8 billion—saw an 11.5% annual gain, and adjusted earnings per share—at $3.52—marked a 35% annual gain, topping Wall Street expectations of $3.08 per share. Quarterly operating profit was up 91% to 3.9 billion. Full-year 2021 revenue saw a 15% annual gain, to $97.3 billion, with operating profit at $12.8 billion.

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

Individual segment results for Q4:

  • U.S. domestic package revenue headed up 12.4%, to $17.997 billion, and average daily package volume rose 0.2%, to 25.194 million daily packages, with UPS attributing those gains to growth, and total average revenue per package up 10.5% at $11.15; 
  • International Package revenue, at $5.397 billion, was up 13.1%, with average daily volume down 4.8%, to 4.088 million packages per day, and total revenue per package up 16.4% to $20.11; and
  • Supply Chain Solutions revenue, at $4.677 billion, rose 6.7%, with UPS pointing to strong revenue increases in its Forwarding and Logistics business, for a combined 28%

CEO Tomé said on the company’s earnings call today that the external environment is challenging, due to the ongoing impacts of the pandemic, labor tightness, upstream supply chain jams, and rising inflation. But inside the company’s “Better not bigger” framework, she said UPS is maniacal about controlling what it can control.

“We are laser-focused on improving revenue quality, reducing our costs to serve, and allocating capital in a disciplined fashion,” she said. “This is enabling us to move faster and be more agile so we capture the best opportunities in the market, enhance the customer experience, and continuously improve our financial performance.”

For the fourth quarter, Tomé said results exceeded expectations, driven by improved revenue quality across all three of UPS’s business segments and significant gains in productivity. And she noted that the company’s Global Smart Logistics Network powered by technology developed by UPS engineers enabled UPS to deliver another successful Peak Season.

“It may have been our hardest [Peak Season] ever,” she said. “We had higher volume than expected at the beginning of the quarter, and lower volume at the end. But our sales, engineering, and operating teams remained agile and pivoted with changes in global market conditions and the needs of our customers. We delivered excellent service levels, avoided chaos costs, and improved efficiency in the network.”

As an example of that, she said productivity in UPS’s U.S. operations improved by 1.7% for the fourth quarter, as measured by pieces per hour. This was also reflected by UPS reversing a multi-year downward trend and delivered a return on invested capital of 30.8%, a 910 basis points gain over 2020.   

UPS CFO Brian Newman said on the call that in the fourth quarter that supply chain challenges and the emergence of the Omicron variant weighed on total economic growth. He observed how both December retail sales was lower than expected and the inventory-to-sales ratio remained at historic lows.

“Despite these factors, our financial performance was better than expected, as the progress we made executing our strategy continues to deliver strong results,” he said.  

Looking at the holiday season, Newman praised the UPS teams for doing an excellent job in executing the company’s plan and making adjustments where appropriate.

“Early in the quarter, volume came in higher than expected and we quickly adjusted the network by leveraging our weekend operations, package flow technology, and automated facilities,” he said. “Later in the quarter volume levels were lower than expected, and Omicron and inventory challenges negatively impacted the enterprise retail sector. Our operators adjusted the network and importantly also pulled out costs. We decreased staffing levels and returned rental equipment early, which helped to lower the [annual] operating expense growth rate.”

For 2022, UPS said it is expecting consolidated revenue to come in at around $102 billion, with an adjusted operating margin at around 13.7%, and adjusted return on capital to top 30%. And it added that UPS is planning for capital expenditures to be 5.4% of revenue, or $5.5 billion.

“These investments will continue to improve overall network efficiency and move us further down the path to achieving our 2050 carbon neutral goal,” said Newman. “About 60% of our capital spending plan will be allocated to growth projects, and about 40% to maintenance.”

Some of these efforts include:

  • 30 delivery centers and two automated hub projects set to be delivered in 2022, which will enable UPS to drive greater efficiency by better balancing sort capacity with delivery capacity;
  • purchase more than 3,700 autonomous vehicles in 2022, including around 425 Arrival electric delivery vehicles to be deployed in the U.S. and in Europe;
  • take delivery of two new 747-8 aircraft in 2022, adding international capacity;
  • make pre-delivery payments on the 19 Boeing 767 freighters UPS announced in December, which are set the enter the UPS fleet between 2023 and 2025; and
  • invest more than $100 billion to support the company’s carbon neutral goals   

About the Author

Jeff Berman, Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman

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