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UPS Signs 5-Year Tentative Labor Deal: What Lies Ahead?

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United Parcel Service, Inc. (UPS - Free Report) received encouraging news on the labor front when the company inked a tentative deal with the International Brotherhood of Teamsters — a labor union in the United States and Canada. Notably, this provisional agreement with the teamsters union pertains to the wages and other benefits of multiple employees (mostly package handlers and drivers) in Louisville.

Replacing the current four-year wage progression scheme for part time workers, the new agreement calls for increases in their starting pay rate for each year of the tenure of the contract ($13.00 per hour on Aug1, 2018 to $15.50 on Aug1, 2022). In fact, all part-time employees joining UPS after Aug 1 will get the new starting rates. The deal also aims at providing increased pension benefits to its part-time as well as full-time employees.

Moreover, the agreement calls for a new provision of full-time combination drivers in a bid to address concerns like excessive forced overtime and deliveries on weekends. Their pay would start at $20.50, with a maximum of $34.79 on Aug. 1, 2022. The provision also increases full-time opportunities for part-time workers.

However, there is a long way to go before the deal becomes effective. We note that tentative agreements do not necessarily mean that the deal will be operational. The provisional deal inked by UPS will be reviewed and subsequently voted upon by union members, probably next month. The deal will be effective only if the voting result is favorable. In that case, it will be effective till Jul 31, 2023.

With so much to look forward to on the labor front, investors will keenly await further updates on this burning issue.

Zacks Rank & Key Picks

UPS carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Transportation sector are GATX Corporation (GATX - Free Report) , SkyWest, Inc. (SKYW - Free Report) and Expeditors International of Washington, Inc. (EXPD - Free Report) .  While GATX and SkyWest carry a Zacks Rank #2 (Buy), Expeditors sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past six months, shares of GATX and Expeditors have rallied more than 17% and 18%, respectively, while SkyWest stock has gained above 5%.

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