UPS seems to be managing its costs adroitly. The latest five-year contract between logistics major United Parcel Service (NYSE:UPS) and workers represented by the Teamsters Union is expected to cost less than $30 billion, as noted by Carol Tome, the CEO of the company, in an interview with CNBC.
The deal, covering nearly 340,000 UPS workers, will involve wage and benefit increases at a 3.3% compound annual growth rate over the contract term. The company expects to incur 46% of the wage and benefit costs in the second half of this year.
Last month, UPS had slashed its full-year top-line and bottom-line expectations amid rising labor costs and its negotiations with the Teamsters Union.
UPS handles nearly a quarter of all parcels in the U.S. on a daily basis, and its recent deal with the Teamsters avoided a workers’ strike that could have meant a disruption to package deliveries in the U.S.
Today, Citi analyst Christian Wetherbee assigned the stock a Buy rating while lowering the price target to $180 from $200. Overall, the Street has a consensus price target of $187.31 on UPS, alongside a Moderate Buy consensus rating.
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