By Lisa Baertlein and Shivansh Tiwary

(Reuters) -United Parcel Service Inc on Tuesday beat expectations for quarterly adjusted profit, as it prioritized lucrative shipments and kept a tight lid on costs as global recession threatens and inflation deflates e-commerce demand.

Shares of the world’s largest parcel delivery firm rose 3.8% to $183.78 in early trading after UPS also raised its quarterly dividend by 6.6% and announced a new $5 billion share repurchase plan.

Executives at the Atlanta-based company said they are paring costs to match a decelerating transportation market that has translated into softer demand for UPS air shipments and home deliveries, while also investing in future growth.

UPS Chief Executive Officer Carol Tomé described the outlook for economic growth in 2023 as “cloudy.”

“Geopolitical tensions are rising and we have a labor contract to negotiate for us to enter the year of rebuilding,” Tomé said, referring to the July 31 expiration of the contract covering the company’s Teamsters-represented workers.

UPS Chief Financial Officer Brian Newman elaborated on the economic risks, citing decades-high inflation, rising interest rates, recession risks, war in Eastern Europe and COVID-related disruptions in China.

“We have developed multiple plan scenarios that will help us quickly pivot in an uncertain macro environment,” Newman said.

UPS forecast 2023 revenue between $97.0 billion and $99.4 billion, below analysts’ average target of $99.98 billion, according to Refinitiv data.

“(The) full-year 2023 outlook appears to point to a resilient outcome despite the macro challenges,” said Fadi Chamoun, an analyst at BMO Capital Markets.

Meanwhile, anxiety is building around a potential strike by UPS workers represented by the Teamsters union.

UPS sees the talks as a “win, win, win” for the company, workers and customers and plans to have a deal by the end of July, Tomé said.

She said the two sides are not far apart on key issues and that UPS is already working on key concerns such as how to keep workers safe when outside temperatures soar.

UPS is focused on winning more higher-margin healthcare and business-to-business shipments while squeezing operational efficiency.

It has done a better job of controlling costs than rival FedEx Corp, which recently announced a plan to slash $3.7 billion in costs this year.

For the fourth quarter, UPS reported an adjusted profit of $3.62 per share, above Wall Street’s expectations of $3.59 per share, even as revenue fell slightly more than Wall Street expected.

(Reporting by Lisa Baertlein in Los Angeles And Shivansh Tiwary in Bengaluru; Editing by Shinjini Ganguli and Paul Simao)

FILE PHOTO: A United Parcel Service (UPS) vehicle reverses into a facility in Queens, New York City, U.S., May 9, 2022. REUTERS/Andrew Kelly/File Photo

ANDREW KELLY

FILE PHOTO: The company logo for United Parcel Service (UPS), is displayed on a screen at the New York Stock Exchange (NYSE) in New York, U.S., October 22, 2019. REUTERS/Brendan McDermid

BRENDAN MCDERMID