UPS sees sales, profit growth coming out of ‘difficult’ 2023

United Parcel Service Inc. expects sales and profit to grow over the next three years as the courier overcomes soft demand for package delivery coming out of the pandemic.

Annual consolidated revenue will climb as high as $114 billion in 2026, UPS said Tuesday in a statement detailing financial targets. That would mark a sharp rise from last year’s total of about $91 billion. The company also expects its adusted operating margin to surpass 13% in three years.

“After coming off a difficult market in 2023, the small package industry is poised to return to growth in 2024 and beyond,” Chief Executive Officer Carol Tomé said in the statement. The company intends to target “premium markets” while focusing on improved efficiency and productivity.

The long-term outlook shows how the company is contending with the challenges of flagging volume and high labor expenses after reaching a costly new union agreement last year. Shipping demand has been impacted as shoppers buy more in stores post-pandemic and inflation crimps purchasing power.

The shares rose 2.8% before regular trading in New York.

Tomé has pushed a strategic plan since taking the reins in 2020 to become “better not bigger,” an initiative to focus on more profitable business potentially at the expense of volume growth. The effort helped UPS’ market value roughly double in her first two years.

The courier has faced increased competition lately, including from the United States Postal Service, which has hurt margins post-pandemic.

The company agreed to a new union labor deal last year that increases wages and benefits by an average of 3.3% over five years, with the biggest increase coming in 2024 with a 10% jump. The deal also sees upwards adjustments to pension and health benefits and other expenses, including a new paid holiday.

UPS said in January that it would cut 12,000 white-collar jobs — about 14% of its full- and part-time managers — to cut costs.

The company also said earlier this year it would explore the sale of its Coyote truck brokerage business. That came after UPS announced a deal to buy MNX Global Logistics in November for an undisclosed sum to build out its health-care transportation business, having previously bought Marken in 2016.