United Parcel Service Inc. (NYSE:UPS)

The analysis of the annual current and deferred income tax expenses over the given five-year period reveals significant fluctuations, indicating changes in the company's tax obligations and accounting strategies related to income tax.

Current Income Tax Expense

The current income tax expense shows an overall increasing trend from 2020 to 2022, rising from 1,359 million US dollars in 2020 to a peak of 2,746 million US dollars in 2022. However, this upward trend reverses sharply in 2023, with the expense dropping to 1,666 million US dollars, and then stabilizes in 2024 at 1,675 million US dollars. This pattern suggests that actual taxes paid or accrued increased through 2022 but experienced a marked reduction thereafter, remaining relatively stable in the last recorded period.

Deferred Income Tax Expense

The deferred income tax expense displays notable volatility over the period. Initially negative at -858 million US dollars in 2020, it shifts dramatically to a positive 1,645 million US dollars in 2021. In 2022, the figure decreases to 531 million US dollars, followed by a further decline to 199 million US dollars in 2023. By 2024, the deferred tax expense turns slightly negative at -15 million US dollars. These fluctuations could reflect changes in timing differences between accounting and tax reporting, adjustments to deferred tax assets and liabilities, or tax planning measures influencing future tax payments.

Total Income Tax Expense

The aggregate income tax expense, comprising current and deferred components, mirrors the volatility observed separately. Starting from 501 million US dollars in 2020, the total expense increases sharply to 3,705 million US dollars in 2021, before declining to 3,277 million US dollars in 2022. The decreasing trend continues with 1,865 million US dollars in 2023 and further lowers to 1,660 million US dollars in 2024. This pattern indicates that total tax charges were substantially elevated in the early part of the period analyzed, followed by significant reductions in subsequent years, potentially due to changes in taxable income, tax rates, or recognition of deferred tax items.

Overall, the data reveals a peak in both current and total income tax expenses around 2021-2022, with a marked decrease and stabilization in later years. The deferred income tax expense's volatility suggests ongoing adjustments and revaluation of tax timing differences. The alignment of the trends in current and total tax expenses points to significant external or internal factors influencing the tax positions during these years.

The effective income tax rate demonstrates a clear downward trend from 27.2% in 2020 to 21.8% in 2023, before slightly increasing to 22.3% in 2024. This overall decline suggests improved tax efficiency or beneficial tax policy impacts over the period analyzed.

Statutory U.S. federal income tax rate

The statutory federal tax rate remains constant at 21% throughout all years, indicating no legislative changes affecting this component.

U.S. state and local income taxes, net of federal benefit

This tax component showed notable volatility, starting with a negative rate of -2.6% in 2020, shifting to positive values from 2.2% in 2021 and gradually declining from 2% in 2022 to 1.8% in 2024. The negative rate in 2020 followed by positive rates suggests changes in state and local tax considerations or benefits affecting net calculations.

Non-U.S. tax rate differential

The data for this rate is intermittent but shows a small positive differential of 1.6% in 2020, diminishing to near zero or negative values (-0.6%) by 2023. This decline may reflect changing international tax environments or geographic shifts in taxable income.

FDII and GILTI, net

Values for this category begin in 2022 with a negative 0.7% and progressively decrease, reaching -1.2% by 2024, indicating increasing tax benefits or credits related to foreign derived intangible income and global intangible low-taxed income provisions.

U.S. federal tax credits

Federal tax credits consistently exert a reducing impact on the tax rate, starting at -3.6% in 2020 and stabilizing around -0.8% by 2024, signifying diminishing utilization or availability of credits over time.

Goodwill and other asset impairments

This item shows a notable 5.1% impact in 2020, disappears in subsequent years, and shows a minor 0.1% in 2023, suggesting a significant one-time impairment affecting taxes in 2020 with minimal effects thereafter.

Net uncertain tax positions

The tax impact of uncertain tax positions declines sharply from 3.6% in 2020 to negative territory (-0.5%) in 2023, indicating resolution or favorable settlements of such positions reducing tax liabilities, but then slightly increases to 0.2% in 2024.

Other

This category fluctuates between positive and negative values, moving from 2.1% in 2020 to negative (-1.1%) in 2021, close to zero in 2022, and increasing to 1.3% by 2024, reflecting diverse factors affecting tax expense not categorized elsewhere.

Pension and Postretirement Benefits

The pension and postretirement benefit obligations display a significant decline from 2020 to 2022, dropping from $3,994 million to $637 million. However, a reversal occurs in the subsequent years, with the figure rising to $1,304 million in 2023 and further to $1,474 million in 2024, indicating a partial recovery or increased obligations over this period.

Loss and Credit Carryforwards

Loss and credit carryforwards show a moderate fluctuation. After a slight increase from $325 million in 2020 to $342 million in 2021, the value declines to $232 million by 2023, before increasing again to $308 million in 2024. This pattern suggests variability in tax planning strategies or changes in taxable income.

Insurance Reserves

Insurance reserves steadily increase from $535 million in 2020 to $646 million in 2024, reflecting a gradual buildup of reserve requirements or increased risk coverage over the five-year span.

Accrued Employee Compensation

This liability decreases significantly from $583 million in 2020 to $304 million in 2022, then stabilizes around the mid-300 million range in 2023 and 2024. The initial decline might be attributed to changes in compensation policies or payout timing.

Operating Lease Liabilities

Operating lease liabilities exhibit a consistent upward trend from $736 million in 2020 to a peak of $1,073 million in 2023, slightly decreasing to $1,021 million in 2024. This indicates an increase in leased assets or lease obligations, possibly due to expansion or changes in leasing strategies.

Other Liabilities (Positive Values)

The "Other" category under liabilities fluctuates, beginning at $540 million in 2020, peaking at $646 million in 2022, and then decreasing to $367 million by 2024. This suggests variability in miscellaneous liabilities, possibly influenced by non-recurring items or adjustments.

Deferred Tax Assets

Deferred tax assets drop sharply from $6,713 million in 2020 to $3,380 million in 2022, followed by a gradual increase to $4,168 million by 2024. This pattern may reflect changes in temporary differences or expectations of future taxable income.

Deferred Tax Assets Valuation Allowance

The valuation allowance on deferred tax assets remains relatively stable, fluctuating slightly between -$88 million and -$182 million over the period, indicating a fairly consistent assessment of realizability risk.

Deferred Tax Asset, Net of Valuation Allowance

Net deferred tax assets decrease markedly from $6,625 million in 2020 to $3,257 million in 2022, then gradually increase to $3,986 million in 2024. This aligns with the trends in gross deferred tax assets, reflecting net realizable amounts.

Fixed Assets and Capitalized Software

Fixed assets and capitalized software show a steady increase in negative values, from -$5,355 million in 2020 to -$5,974 million in 2023, with a slight reduction to -$5,914 million in 2024. This suggests ongoing investment or capitalization with accumulated depreciation or amortization affecting the net asset value.

Operating Lease Right-of-Use Assets

Right-of-use assets associated with operating leases follow an increasing negative trend from -$730 million in 2020 to -$1,017 million in 2023, decreasing slightly to -$943 million in 2024. This movement is consistent with the increase in operating lease liabilities, reflecting lease capitalization impacts.

Other Assets (Negative Values)

Other assets recorded as negative values increase in magnitude from -$501 million in 2020 to -$708 million in 2022, then slightly decline to around -$612 million by 2024. These changes indicate fluctuations in miscellaneous asset accounts or reclassifications.

Deferred Tax Liabilities

Deferred tax liabilities increase from -$6,586 million in 2020 to a peak of -$7,596 million in 2023, before decreasing marginally to -$7,469 million in 2024, suggesting growing temporary differences generating tax liabilities, with a slight easing towards the end of the period.

Net Deferred Tax Asset (Liability)

The net deferred tax position turns negative after 2020, dropping from a positive $39 million to a negative $2,949 million in 2021, declining further to -$4,163 million in 2022, and recovering slightly to approximately -$3,483 million by 2024. This indicates that deferred tax liabilities have increasingly outweighed deferred tax assets, impacting the net tax-related asset and liability balance.

The financial data reveals distinct trends in deferred tax assets and liabilities over the five-year period ending in 2024.

Deferred Tax Assets

There is a clear downward trend in deferred tax assets, which decreased consistently each year from 527 million USD in 2020 to 112 million USD in 2024. This steady decline indicates a diminishing amount of temporary differences or losses that can be utilized to reduce future tax liabilities.

Deferred Tax Liabilities

In contrast, deferred tax liabilities exhibit significant volatility with an overall increasing trend followed by a reduction. Starting at 488 million USD in 2020, there was a pronounced surge to 3,125 million USD in 2021 and a further increase to 4,302 million USD in 2022. Subsequently, there was a gradual decline in the subsequent two years to 3,772 million USD in 2023 and 3,595 million USD in 2024. This pattern suggests large fluctuations in taxable temporary differences, potentially reflecting changes in asset valuations or tax regulations impacting future tax obligations.

Overall, the data indicates a contraction in deferred tax assets alongside an elevated and somewhat volatile level of deferred tax liabilities. This divergence may signal shifting tax planning strategies or changes in the underlying asset and liability base that impact deferred taxes."

The analysis of the financial data reveals several key trends over the five-year period ending in 2024.

Total Assets

Reported total assets exhibited an increasing trend from 62,408 million USD in 2020 to a peak of 71,124 million USD in 2022, followed by a slight decline through 2024, ending at 70,070 million USD. Adjusted total assets show a similar pattern, peaking in 2022 at 70,985 million USD and decreasing modestly thereafter to 69,958 million USD by 2024. The adjustments slightly reduce the total asset values but maintain the same general trend.

Total Liabilities

A marked decrease in reported total liabilities was observed from 61,739 million USD in 2020 to 51,321 million USD in 2022. However, the liabilities increased again in 2023 to 53,543 million USD and remained relatively stable through 2024. Adjusted total liabilities show a consistent decline from 61,251 million USD in 2020 to 47,019 million USD in 2022, before increasing to 49,771 million USD in 2023 and slightly decreasing to 49,732 million USD in 2024. The adjusted figures underscore a net reduction in liabilities over the period, though the increase in the final two years suggests a partial reversal of the earlier trend.

Equity for Controlling Interests

Equity attributable to controlling interests, both reported and adjusted, increased significantly from 2020 to 2022. Reported equity rose from 657 million USD in 2020 to 19,786 million USD in 2022, then declined to 16,718 million USD by 2024. Adjusted equity values were higher than reported values and followed a similar trajectory, increasing from 618 million USD in 2020 to 23,949 million USD in 2022, then decreasing to 20,201 million USD in 2024. This pattern suggests strengthening equity positions through 2022, followed by some erosion in subsequent years.

Net Income

Reported net income increased dramatically from 1,343 million USD in 2020 to 12,890 million USD in 2021, then declined progressively each year to 5,782 million USD by 2024. Adjusted net income shows a slightly different pattern with a lower value in 2020 (485 million USD), a peak of 14,535 million USD in 2021, followed by a steady decrease similar to reported figures, ending at 5,767 million USD in 2024. The sharp rise in 2021 indicates a period of significant profitability, but the subsequent declines point to deteriorating income performance.

Overall, the data reflects a period of asset growth and strengthening equity, primarily through 2022, followed by stabilization or modest declines in both assets and equity through 2024. Liabilities decreased initially but rose again in the latter years, suggesting changes in financing or operational conditions. The net income figures highlight a peak in profitability in 2021 with declining results thereafter, which may warrant further investigation into operating efficiency or market conditions affecting earnings. Adjusted values generally align with reported metrics but provide a nuanced perspective on the company’s financial status, reinforcing the observed trends.

The financial data reveals notable trends over the period from 2020 to 2024 across profitability, asset efficiency, leverage, and returns.

Net Profit Margin

Both reported and adjusted net profit margins exhibit a peak in 2021, with reported margin reaching 13.25% and adjusted margin slightly higher at 14.94%. Following this, there is a consistent decline through 2024, dropping to 6.35% reported and 6.33% adjusted, indicating reduced profitability relative to sales over time. The adjusted margin closely follows the reported trend, suggesting that deferred income tax adjustments do not significantly distort the margin pattern.

Total Asset Turnover

Asset turnover ratios remain relatively stable throughout the period. Reported total asset turnover fluctuates modestly between 1.28 and 1.41, peaking in 2022 at 1.41. Adjusted figures are nearly identical, differing only in the third decimal place, reflecting consistent asset utilization in generating revenue. The slight dip observed post-2022 indicates a minor decline in efficiency or changes in asset base relative to sales.

Financial Leverage

Financial leverage ratios demonstrate a sharp decrease from 94.99 in 2020 (reported) to approximately 3 to 4 range in subsequent years, stabilizing around 4.1 by 2024. Adjusted leverage mirrors this trend but at slightly lower levels, declining from 100.13 in 2020 to around 3.46 in 2024. The unusually high leverage figure in 2020 suggests an atypical reporting element or accounting anomaly that was rectified by 2021 onwards. From 2021 forward, leverage stabilizes at moderate levels, indicating more typical capital structure usage.

Return on Equity (ROE)

ROE shows a substantial decline over the five-year span. The reported ROE drops from a very high 204.41% in 2020 to 34.59% in 2024, whereas the adjusted ROE starts lower at 78.48% in 2020, peaks at 84.5% in 2021, and decreases steadily afterward to 28.55% in 2024. The large discrepancy in 2020 between reported and adjusted ROE echoes the leverage anomaly noted above. Post-2021, both measures show a consistent downward trend, indicating reduced effectiveness in generating equity returns.

Return on Assets (ROA)

ROA follows a similar pattern to ROE but on a lower scale. Reported ROA moves from 2.15% in 2020, peaks sharply at 18.57% in 2021, and then declines to 8.25% by 2024. Adjusted ROA is slightly more volatile but aligns closely in trend, peaking at 21% in 2021 and falling to 8.24% by 2024. The spike in 2021 for both ROA and ROE corresponds with peak net profit margins and reflects strong profitability and asset use that year before subsequent reduction.

In summary, the data reflects a period of elevated profitability and returns in 2021, followed by a steady decline through 2024 across all key metrics. Asset turnover remains relatively stable, while financial leverage normalizes after an extreme reporting level in 2020. The adjustments for deferred income tax have a moderate impact on reported figures, especially notable in 2020, but trends between reported and adjusted values largely align over time.

The financial data indicates notable fluctuations in both reported and adjusted net income over the five-year period analyzed. Reported net income demonstrates a substantial increase from 1,343 million US dollars in 2020 to a peak of 12,890 million in 2021, followed by a declining trend over the subsequent years, falling to 5,782 million by the end of 2024. Adjusted net income reflects a similar pattern, rising sharply from 485 million in 2020 to 14,535 million in 2021, then gradually decreasing each year to reach 5,767 million in 2024.

Net profit margins, both reported and adjusted, exhibit corresponding trends. The reported net profit margin expanded greatly from 1.59% in 2020 to 13.25% in 2021, then progressively declined to 6.35% in 2024. Adjusted net profit margin follows a comparable trajectory, increasing from 0.57% in 2020 to a high of 14.94% in 2021, then decreasing annually to 6.33% by 2024.

Income Trends

Both reported and adjusted net incomes saw remarkable growth in 2021, indicative of a significantly improved financial performance that year. However, the subsequent years reveal a consistent downward trend, suggesting potential challenges impacting profitability or operational efficiency.

Profit Margin Patterns

Profit margins mirrored the income trends, showing peak profitability in 2021 with margins declining substantially thereafter. This decline may point toward rising costs, competitive pressures, or other factors eroding profit margins despite previous strong earnings.

Comparison Between Reported and Adjusted Figures

Adjusted net income and margin were generally higher than the reported figures, especially noticeable in 2021 and 2022, implying that adjustments related to deferred taxes or other accounting factors had a positive effect on profitability metrics during that period.

Overall Insights

The data reflects a period of strong financial performance in 2021, followed by a gradual but persistent decline through 2024. Continuous monitoring is recommended to assess the underlying causes of the downward trend and to evaluate the effectiveness of financial and operational strategies to restore profitability.

Total Assets

Both reported and adjusted total assets exhibit a rising trend from 2020 through 2022, increasing from approximately 62.4 billion USD in 2020 to a peak near 71.1 billion USD in 2022. Subsequently, there is a decline in total assets in 2023 and 2024, with reported assets reducing to approximately 70.1 billion USD by the end of 2024, and adjusted assets following a similar pattern ending close to 69.96 billion USD. The movements indicate a phase of asset growth for two years, followed by a slight contraction over the last two years.

Total Asset Turnover

The reported total asset turnover ratio shows a gradual increase from 1.36 in 2020 to 1.41 in 2022, implying improved efficiency in generating sales from asset base during these years. However, there is a noticeable decrease in 2023 to 1.28, followed by a minor recovery to 1.30 in 2024. The adjusted total asset turnover closely follows this pattern with slightly higher values across the periods, rising from 1.37 in 2020 to 1.41 in 2022, dipping to 1.29 in 2023, and rising marginally again to 1.30 in 2024. This suggests a peak in operational efficiency in 2022, with a small decline in subsequent years but maintaining relatively high turnover.

Total Assets

The reported total assets exhibited an overall increasing trend from 62,408 million US dollars in 2020 to a peak of 71,124 million US dollars in 2022. Following this peak, the total assets showed a slight decline to 70,857 million in 2023 and further decreased to 70,070 million in 2024. The adjusted total assets mirrored this pattern closely, rising from 61,881 million in 2020 to 70,985 million in 2022, then slightly declining to 70,731 million in 2023 and 69,958 million in 2024. This indicates a period of asset growth up to 2022, followed by a modest contraction in subsequent years.

Equity for Controlling Interests

Reported equity for controlling interests showed a significant increase between 2020 and 2021, from 657 million to 14,253 million, and continued to rise to 19,786 million in 2022. Thereafter, a decline occurred with equity decreasing to 17,306 million in 2023 and further to 16,718 million in 2024. Adjusted equity followed a somewhat similar trajectory but at generally higher levels, starting at 618 million in 2020, rising robustly to 17,202 million in 2021 and peaking at 23,949 million in 2022. It subsequently decreased to 20,952 million in 2023 and 20,201 million in 2024. This suggests that both reported and adjusted equity strengthened notably through 2022 before experiencing a downward adjustment in the following years, with adjusted equity maintaining a consistently higher balance than reported equity.

Financial Leverage

Reported financial leverage, measured as a ratio, displayed a steep decrease from an extremely high ratio of 94.99 in 2020 to 4.87 in 2021, followed by a continued decline to 3.59 in 2022. However, it then reversed course slightly, increasing to 4.09 in 2023 and further to 4.19 in 2024. Adjusted financial leverage also decreased markedly from 100.13 in 2020 to 4.02 in 2021 and continued declining to 2.96 in 2022. Subsequently, it rose moderately to 3.38 in 2023 and 3.46 in 2024. Overall, these trends indicate a substantial deleveraging from 2020 to 2022, followed by a mild increase in leverage ratios during 2023 and 2024, although the adjusted leverage remains consistently lower than the reported leverage.

The financial data reveals distinct trends in income, equity, and return on equity (ROE) metrics over the observed periods. Both reported and adjusted figures provide insights into the company’s profitability and equity performance after accounting for reported and deferred income tax adjustments.

Net Income Trends

Reported net income experienced a substantial spike from 1,343 million USD in 2020 to 12,890 million USD in 2021, followed by a gradual decline to 5,782 million USD by 2024. Adjusted net income mirrors this pattern but shows generally higher values after 2020, peaking at 14,535 million USD in 2021 before decreasing to 5,767 million USD in 2024. This indicates significant volatility with a peak in 2021 and a notable reduction in the subsequent years.

Equity for Controlling Interests

Reported equity rose markedly from 657 million USD in 2020 to a high of 19,786 million USD in 2022, then declined to 16,718 million USD by 2024. Adjusted equity follows a similar trajectory but with consistently higher values, increasing from 618 million USD in 2020 to 23,949 million USD in 2022, then receding to 20,201 million USD in 2024. These trends suggest initial equity growth followed by a moderate contraction in the later periods.

Return on Equity (ROE) Analysis

Reported ROE was extremely high in 2020 at 204.41%, then decreased sharply to 90.44% in 2021 and continued to decline steadily to 34.59% in 2024. Adjusted ROE values also show a downward trend but start lower at 78.48% in 2020, peak slightly at 84.5% in 2021, and then fall progressively to 28.55% by 2024. This downward trajectory in ROE reflects diminishing profitability relative to equity over time, despite earlier peaks.

Overall Observations

The data overall depicts a strong performance spike around 2021, with both income and equity metrics peaking before undergoing decline in later years. The adjusted figures, which account for tax-related adjustments, consistently display higher equity and net income numbers, suggesting that deferred tax considerations positively affect reported financial strength. However, both reported and adjusted ROE figures indicate diminishing efficiency in generating returns on equity, highlighting a trend of declining profitability relative to equity bases over the recent periods.

The financial data reveals several notable trends across the examined periods. Reported net income shows a significant increase from 1,343 million US dollars in 2020 to a peak of 12,890 million in 2021, followed by a gradual decline in the subsequent years, reaching 5,782 million by 2024. The adjusted net income mirrors this pattern, increasing sharply from 485 million in 2020 to 14,535 million in 2021, then decreasing steadily to 5,767 million in 2024.

Total assets, both reported and adjusted, display a consistent upward trajectory from 2020 to 2022, increasing from approximately 62,408 million to 71,124 million (reported) and from 61,881 million to 70,985 million (adjusted), after which there is a slight decrease moving towards 2024. By the end of 2024, reported and adjusted total assets have slightly declined to 70,070 million and 69,958 million, respectively.

Return on Assets (ROA) figures, reported and adjusted, follow a pattern similar to net income. Both metrics peak in 2021, with reported ROA at 18.57% and adjusted ROA at 21.00%. After this peak, ROA declines over the years, with reported ROA falling to 8.25% and adjusted ROA to 8.24% by 2024. The adjusted ROA consistently remains marginally higher than the reported ROA except in the final year, where adjusted ROA is slightly below reported ROA.

Net Income trends

Both reported and adjusted net income surged dramatically in 2021 relative to 2020, signaling an exceptional year, followed by a diminution trend spanning 2022 through 2024.

Total Assets movements

Total assets increased steadily until 2022 and then exhibited a subtle contraction through the three following years, indicating stabilization or minor asset disposition.

Return on Assets behavior

ROA maximized in 2021 in both reported and adjusted terms, suggesting that asset utilization for profit generation was most efficient in that period; a decline thereafter implies waning asset productivity or profitability pressure.

Overall, the data indicates a peak in financial performance around 2021, with subsequent years marked by reductions in profitability metrics and slightly decreased asset bases. The consistency between reported and adjusted figures suggests that adjustments for deferred income tax have not materially altered the underlying financial trends observed.