My notes on earnings:
“Control what you can control.” Preach this to your employees and management teams. It strikes me that UPS earnings calls have analysts high-fiving the CEO, and FedEx earnings calls do not
First a few UPS tidbits. On-track to deliver full-year targets.
1 - Q4 peak to be later in December compared to last year (remember inventory shortages and “buy early” messaging from everyone). This is natural and expected.
It means they think early discounting will have a muted not a dramatic pull-forward effect on consumer spending patterns.
2 - IHS estimates United States GDP is expected to grow 1.7% this year, and global GDP 2.8%. both less than predicted early this year.
3 - Amazon contractually reducing volume will lead to y/y decline in UPS volume.
4 - Future Margin improvement will come more from productivity than price increases broadly (compared to backward-looking).
5 - Revenue, operating profit, and operating margin all up y/y.
Average daily volume down 1.5% (planned/Amazon-related)
There was a short but illuminating section from Carol Tome’ about how UPS plans for 2023. These principles should be shouted from the rooftops to all leaders.
1 - Stay on strategy. For UPS that is about improving customer and employee experience. Not making wild fluctuations in approach keeps your employees steady.
2 - Build more agility in your plan than ever before.
To me, this means a “test and learn” approach. Rather than commit to large spending yielding possibly bigger volume discounts in the beginning of the year, build it more incrementally. Watch results, and invest as it grows.
3 - Build a conservative plan.
The consequences of overspending could be catastrophic if you build to the higher end of a plan because now you need to invest in staff and facilities to hit that plan.
Instead, project revenue more conservatively and invest/spend more conservatively at first. Chase the upside but follow it, don’t lead it.