10-KPeriod: FY2023

UNITED PARCEL SERVICE INC Annual Report, Year Ended Dec 31, 2023

Filed February 20, 2024For Securities:UPS

Summary

United Parcel Service, Inc. (UPS) reported a decrease in revenue and net income for the fiscal year ended December 31, 2023, primarily driven by macroeconomic headwinds, inflationary pressures, and volume diversion related to labor negotiations. Total revenue declined by 9.3% to $91.0 billion, and net income fell by 41.9% to $6.7 billion. The company faced challenges in its U.S. Domestic and International Package segments due to softening demand and geopolitical tensions. Despite these headwinds, UPS successfully ratified a new national master agreement with the Teamsters, which management expects will lead to improved volume and customer retention in the latter half of 2024. The company is also focused on strategic growth areas, including healthcare and Asia trade lanes, and has made strategic acquisitions to bolster its Supply Chain Solutions segment.

Financial Highlights

53 data points
Beta

Revenue

$90.96B

Net Income

$6.71B

7.4% Net Margin

EPS (Diluted)

$7.80

Total Assets

$70.86B

Cash & Equivalents

$3.21B

Free Cash Flow

$5.08B

Financial Statements
Beta
Revenue$90.96B
Operating Expenses$81.82B
Operating Income$9.14B
Interest Expense$785.00M
Net Income$6.71B
EPS (Basic)$7.81
EPS (Diluted)$7.80
Shares Outstanding (Basic)859.00M
Shares Outstanding (Diluted)860.00M

Key Highlights

  • 1Revenue decreased by 9.3% to $91.0 billion in 2023 compared to $100.3 billion in 2022.
  • 2Net income decreased by 41.9% to $6.7 billion in 2023, down from $11.5 billion in 2022.
  • 3Diluted earnings per share (EPS) decreased to $7.80 in 2023 from $13.20 in 2022.
  • 4U.S. Domestic Package revenue declined by 6.6%, and International Package revenue decreased by 9.5% due to macroeconomic factors and labor negotiations.
  • 5Supply Chain Solutions revenue saw a significant decrease of 19.9%, primarily in the forwarding business, though logistics revenue grew.
  • 6The company ratified a new national master agreement with the Teamsters in Q3 2023, which includes wage and benefit rate increases.
  • 7Capital expenditures were $5.2 billion in 2023, with plans to invest approximately $4.5 billion in 2024, focusing on network enhancements and technology.

Frequently Asked Questions

The decrease in revenue was primarily attributed to macroeconomic headwinds, including inflationary pressures and changes in consumer behavior. Additionally, volume diversion related to labor negotiations with the Teamsters, and reductions in fuel and demand-related surcharges also contributed to the decline.

The ratification of the new national master agreement with the Teamsters in the third quarter of 2023 led to higher year-over-year labor costs, particularly in the second half of the year. These increased costs are expected to persist through the first half of 2024. While the contract impacted costs, UPS reported regaining approximately 60% of diverted U.S. volume after ratification.

UPS anticipates that global economic conditions will improve gradually during 2024, leading to increased volume and revenue growth in the second half of the year. Specifically for the U.S. Domestic Package segment, management expects volume growth rates to be flat in the first half of 2024, with moderate growth expected in the second half. For the International Package segment, volume growth is also expected to be flat in the first half of 2024 and improve in the second half, dependent on global macroeconomic conditions.

Yes, in 2023, UPS acquired MNX Global Logistics, a provider of time-critical and temperature-sensitive logistics, and Happy Returns, a technology-focused company for end-to-end return services. Both acquisitions are reported within the Supply Chain Solutions segment.