It may have an impact on the growth of the United Parcel Service delivery service
Delivery service United Parcel Service Inc. (UPS) increased revenue by almost 6% year-on-year in the last reporting quarter. However, a possible recession could hurt the company, as it has repeatedly happened before. The 7.5% year-on-year increase in earnings per share of United Parcel Service in the past quarter was higher than sales growth. Furthermore, the company confirmed its full-year forecast and announced an increase in the share repurchase program. But, this doesn’t rule out the chance that the delivery service could experience difficulties in the coming months due to high prices and a possible recession.
If the US Federal Reserve continues to raise interest rates, it will slow down economic growth, although it will reduce inflation. But if the regulator does not do this, the economy may go into recession. In previous periods of economic downturn, United Parcel Service could not always keep financial indicators at the required level. Its profits steadily declined during the recession of the early 2000s and plummeted during the recession from 2007 until 2009.
That is, as soon as economic activity decreases, the United Parcel Service business also does not work in the best way. Although the delivery service has expanded its business in recent years, for example, in the field of e-commerce, it remains vulnerable. With a decrease in income, the volume of purchases on the Internet will also decrease. Rising wage costs are another severe risk for United Parcel Service.
So far, the corporation has successfully offset costs by rising pricing. But the economic downturn may make shifting these costs to customers more difficult without consequences. Thus, a recession can lead to two problems — falling demand and rising costs, and United Parcel Service should already be ready to solve these problems quickly to avoid problems in the short term. Probably, these circumstances will lead to increased volatility of United Parcel Service shares.
