Today is an important day for United Parcel Service (UPS) and its employees as the results of the voting on the company’s new five-year labor agreement with the Teamsters union are set to be revealed.
While it may be tempting for investors to assume that the deal is already done and that the voting is merely a formality, this labor negotiation season has been far from ordinary.
Back in July, UPS and the Teamsters reached a preliminary labor deal. However, this was just the beginning of a process that requires the ultimate approval of the union membership. Although union leadership usually recommends ratifying an agreement once it has been reached, the final decision lies in the hands of the members themselves.
The voting process has been ongoing for several weeks, with the results expected to be announced today, between 3 p.m. and 4 p.m. Eastern Time.
While the most probable outcome is ratification, there is still a small chance of a no vote. For example, workers at Spirit AeroSystems, a supplier for Boeing, voted against a contract in June, leading to modifications and eventual ratification a few days later.
There is concern that the current labor deal with UPS may also face rejection due to inflationary pressures. Rising inflation has made it increasingly difficult for workers to determine whether they are truly making progress economically. Over the past two years leading up to the 2018 labor negotiation, consumer price inflation averaged approximately 2.1% per year. In contrast, it has averaged around 6.6% per year in the two years leading up to this negotiation.
The proposed labor agreement includes wage increases that will average about 5% to 6% annually.
Since the announcement of the deal last month, UPS stock has declined by approximately 11%, whereas the S&P 500 has experienced a 3% decrease over the same period. Meanwhile, FedEx stock has remained relatively flat. These fluctuations may be attributed to the increased costs that UPS might face as a result of this labor agreement.
This crucial moment for UPS workers and their labor deal will soon reveal whether the agreement has been ratified or if other actions will be necessary. The outcome will undoubtedly impact both UPS and its employees, as well as provide insights into the larger labor landscape.
UPS Drivers’ Earnings: Unveiling the True Story
Many news headlines can be deceptive when it comes to understanding the earning potential of UPS drivers. According to TD Cowen analyst Helane Becker, reports claiming that UPS drivers earn a whopping $170,000 per year are misleading. In reality, the base pay is approximately $85,000, with additional benefits constituting the remaining portion.
Analyst Ratings and Projections
Despite this, both analysts still maintain a “Hold” rating for UPS stock. Becker has set a target price of $190 per share, while Chappell’s target price is slightly lower at $185. Currently, the stock stands at $167.67 as of early Tuesday afternoon.
Analysts’ Views on UPS
Approximately 47% of analysts who cover the company have given UPS shares a “Buy” rating. To put this into perspective, the average “Buy” rating ratio for stocks in the S&P 500 is roughly 55%. Additionally, the average price target set by analysts for UPS shares is around $192 per share.
Factors Impacting UPS
While concerns about costs might account for UPS’ relatively low “Buy” rating ratio, other factors such as a sluggish economy and fierce competition from Amazon.com are also playing significant roles. As Amazon ventures into the third-party logistics sector, it will directly compete with not only FedEx but also UPS.
UPS Stock Rating a Year Ago
A year ago, 50% of analysts covering UPS rated the company’s shares as “Buy,” with the average analyst price target hovering around $211 per share.
Impact of Teamsters’ Vote
The decision made by Teamsters’ members holds tremendous significance not only for UPS investors but also for other major companies like General Motors, Ford Motor, and Stellantis. These automakers are currently in negotiations with the United Auto Workers. The outcome of the Teamsters’ vote could influence negotiators on both sides. Anticipated to take place over the next few weeks, the auto negotiations’ contract will expire in mid-September.
The Future Ahead
In the event that Teamsters members refuse to ratify the agreement, UPS will go back to the drawing board. Although this may lead to some stock volatility, both the company and the union have a blueprint for crafting a new deal.