What do UPS earnings say about where companies are putting their priorities?
What do UPS earnings say about where companies are putting their priorities?
Quarterly earnings from UPS, reported Tuesday, reveal what a lot of folks expected. Those rough contract negotiations with the Teamsters, which stirred fears that much of the nation’s shipping would be shut down if there was a strike, hurt the business even though a deal was made.
UPS said its revenue fell in the second quarter as clients diverted their business elsewhere because of worries about a potential work stoppage. Daily package volume was down almost 10%, or by about 1 million a day.
Teamsters Union members will vote on the negotiated contract this month. On the earnings call with analysts and investors, UPS Chief Financial Officer Brian Newman characterized the contract a win-win.
At the same time, “the union wage rate increases included in our new labor agreements for the first year are higher than we originally planned,” he said.
Newman added that that’s one reason the company reduced its revenue and profit targets for the year.
“Any time one cost goes up, there’s less money to go around for everything else,” said Richard Morrison, a senior fellow at the conservative Competitive Enterprise Institute. “Including less money for dividends for shareholders, less money for things like stock buybacks, although some companies are still doing those.”
UPS is still planning stock buybacks, and it’s worth noting that the company was among about 200 that signed a 2019 pledge saying corporations would commit to prioritizing employees along with shareholders.
But when you look at the corporate world more broadly, “the deck is still stacked in favor of the investors,” noted Peter Cappelli, a professor of management at the Wharton School.
Most of the moves companies have made in favor of employees have involved “wellness,” not necessarily wages, he said.
“I think what we have seen so far, the extent to which they are … pushing more money in employee directions, it’s because of a tight labor market,” Cappelli said.
And a tight labor market can give workers — and potentially their unions — more leverage to press companies on who gets to pocket how much of the profit.
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