United Parcel (NYSE:UPS) Cutting Costs: New Labor Contract Less than $30B
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United Parcel (NYSE:UPS) Cutting Costs: New Labor Contract Less than $30B

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UPS expects to incur a major part of the wage and benefits costs associated with its recent labor deal in the second half of this year.

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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