What happened

Shares of United Parcel Service (UPS 2.42%) were moving higher today after a modest beat on the bottom line in its fourth-quarter earnings report. A dividend hike and a new share-repurchase authorization were enough to reassure investors that the package-delivery giant can deliver solid results in a difficult environment.

As of 10:36 a.m. ET, the stock was up 3.8%.

So what

Revenue in the fourth quarter actually fell 2.7% to $27 billion. This was a reflection of volume declines, a stronger dollar, lower rates for air and ocean freight, and weakness in China. That figure missed analyst estimates at $28.09 billion.

While adjusted operating profit rose in the U.S. (its biggest segment) due to price hikes, it fell in international and supply-chain solutions due to lower volume and rates. Overall, adjusted earnings per share (EPS) ticked up 0.8% to $3.62, which beat estimates of $3.59.

The company also said it would raise its quarterly dividend by 6.6% to $1.62 per share, which gives the stock a dividend yield of 3.5%. The company approved a new $5 billion share-repurchase program, as well, replacing the existing one.

CEO Carol Tome said: "For the year, we reached our targeted consolidated operating margin and return on invested capital goals one year earlier than originally anticipated. Our results in 2022 demonstrate our strategy is working."

Now what

Looking ahead, the company forecast revenue for $97 billion-$99.4 billion in 2023, below the 2022 total at $100.3 billion and the analyst consensus of $100 billion. It also sees an adjusted operating margin of 12.8%-13.6%, which compares to the final 2022 results at 13.8%. This implies that adjusted earnings per share will be down for the year. Analysts had expected adjusted EPS to fall from $12.94 in 2022 to $12.15 in 2023.

UPS also said it expected to spend $5.3 billion in capital expenditures, $5.4 billion on dividends, and $3 billion in share repurchases.   

Investors had largely anticipated weak guidance for 2023, which explains the stock's bump today. Still, if the economic slowdown isn't as bad as expected this year, UPS should be a winner. Meanwhile, the transportation stock's solid dividend yield and reasonable valuation offer a reason to stick around for the recovery.