UPS Q4 2021 Earnings Highlights Focus on Revenue Quality
UPS Q4 2021 Earnings Report Highlights Continuing Revenue Quality Focus
UPS just reported earnings for Q4 2021, and I thought I would give you a few callouts.
1- Overall profit grew 37% y/y, an extremely impressive achievement.
2 - Predict 4.5% growth in 2022 for the economy, which is positive. Expect inflation to experience higher in 1H 2022 than in 2H 2022 (think: labor and materials costs)
3 - Continuing focus on 3 major segments: SMB, Healthcare and B2B. SMB now up to 26% of average daily volume.
4 - Carol Tome' on December 2021 retail shopping: "Where all the customers??? Home due to Omicron. Volume surged earlier in Q4 this year."
5 - Amazon exposure now 11.7% compared to 11.6% exposure in 2019, after surging in 2020. When asked about future Amazon trends, CEO responded: "UPS' Amazon 2021 revenue grew" but then quickly highlighted the companies mutually agree on where each company is best suited to grow volume between them (network planning).
Highlighted UPS focus on healthcare, B2B, SMB, which means diversification away from Amazon long-term.
My take? Expect increased revenue growth for UPS due to Amazon, but share of revenue to tick down going forward.
6 - 60% of capital expenditures in 2022 going to facility and network expansion, which I thought was a positive interesting number particularly since capex is growing to $5.5B in 2022 from $4.2B in 2021.
7 - "Smart Parcel Smart Facility" initiative planning on eliminating 20M network scans as RFID tags rollout across the entire network (no precise timeline given) - you can just imagine how much this will save on labor particularly at induction and at all points throughout the parcel journey on the way to the consumer.
