Logistics giant United Parcel Service has today forecast 2022 revenue above market expectations and boosted its dividend after posting record quarterly earnings, supported by higher shipping rates and demand from more profitable e-commerce customers.
Under chief executive Carol Tome, the world's largest parcel delivery firm has adopted a "better, not bigger" strategy, prioritising lucrative deliveries over volume.
UPS has been vying for more contracts with healthcare firms and small and medium-sized businesses rather than large clients, which generate lower profits.
That led to the company's 2021 adjusted operating margins rising to 13.5% from 11.5% in the comparable pandemic-hit period in 2020 when Tome took over as CEO.
The company today said that number would rise to 13.7% in 2022, a year earlier than expected.
During the crucial fourth quarter season, UPS posted an on-time performance of 96.4% in the three weeks to December 4, better than rival FedEx's 85.7%, according to ShipMatrix data seen by UBS analysts.
"UPS ended the year with strong volumes and momentum heading into 2022," Cowen analyst Helane Becker said in a note, adding that the brokerage expects robust demand on the back of sustained online shopping.
Analysts expect freight rates to remain elevated this year as global shipping networks try to navigate pandemic restrictions and as the labour market remains tight.
FedEx, which is grappling with an Omicron-led surge in Covid-19 cases among its staff, suspended its domestic express freight services today.
UPS forecast 2022 revenue of about $102 billion, above the Refinitiv-IBES estimate of $100 billion. It raised its quarterly dividend by 49% year-on-year to $1.52 per share.
Revenue jumped 11.5% to $27.77 billion in the three months to December 31, with the average revenue per piece increasing by 11.3%.
