Logistics powerhouse United Parcel Service (NYSE:UPS) is at the risk of facing a massive potential strike, as its workers organized under the International Brotherhood of Teamsters union have started voting this week to authorize a strike against the company. More than 333,000 members are voting ahead of the expiration of their five-year contracts on July 31.
A Potential Strike
The results of the strike authorization vote will be out on Friday, June 16. The vote does not imply that a strike will definitely occur. However, if the ongoing negotiations with UPS fail, the Teamsters union is ready to go ahead with one of the largest strikes in American history. UPS has an extensive network in more than 220 countries. It handled an average daily volume of 24.3 million packages and documents in 2022.
UPS and the Teamsters Union have been negotiating since April. As per a CNN report on Monday, the two parties have already reached tentative agreements on 24 issues.
However, Teamster President Sean O’Brien told CNN that while the progress made regarding the negotiations is encouraging, there are several major issues that have yet to be agreed upon. The union is demanding a significant increase in wages and benefits, better working conditions, and improved safety measures. Another key demand is getting air conditioning installed in UPS trucks.
UPS and rival FedEx (NYSE:FDX) have gained immensely from the rise in e-commerce over the past few years, particularly during the pandemic. On an adjusted basis, United Parcel’s net income has increased from $6.3 billion in 2018 to $11.3 billion in 2022. However, the package delivery giant’s Q1 2023 adjusted earnings per share declined 28% to $2.20, as the company saw lower volumes due to a deceleration in U.S. retail sales and demand weakness in Asia. Moreover, CEO Carol Tomé cautioned that the company expects volumes to remain under pressure due to macro challenges.
What is the Prediction for UPS Stock?
Of the 16 top Wall Street analysts covering United Parcel Service, 10 have a Buy rating and six have a Hold rating. Overall, the stock earns a Moderate Buy consensus rating. The average price target of $194.93 implies about 13% upside. Shares are essentially flat year-to-date.
Last week, Atlantic Equities analyst Oliver Holmes initiated coverage of UPS with a Hold rating and a price target of $162. The analyst thinks that UPS “has been a victim of its own success.” He noted that company over-earned during the pandemic and expects its financial performance to “mean revert.”
