This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

UPS on Mend, but Holiday View Unclear

Stocks in this article: UPS FDX

Avondale Partners analyst Donald Broughton is not overly excited about UPS, even though he recently raised his 2010 full-year estimate to $2.30, reflecting global economic improvement. He doesn't much value the company's expectations that it can retain two-thirds of the $1 billion in costs cuts implemented during the past year, adding that FedEx (FDX) made $3 billion in cuts and will retain $2.6 billion of that.

"UPS' ability to cut costs is muted because employees are guaranteed a 4.5% increase in wages in its contract with the Teamsters, which prevents UPS from doing what FedEx did, freezing pay for hourly workers," Broughton says. "UPS may be the best manager of unionized employees in the world, but that comes with challenges."

Broughton also maintains that UPS is losing share to FedEx in its ground operations. He says UPS average daily ground volume has declined by 6.2% this year, while FedEx is reporting a 10.1% increase in ground volume during the same period. A big reason, he said, is SmartPost, a product where FedEx and the United States Postal Service partner to deliver high volumes of small packages to individual residences for business customers.

Kuehn has said that SmartPost takes products from the postal service, not from UPS. UPS offers similar products, which spokesman Norman Black said have seen substantial increases this year but are not separately reported. Black said UPS has not lost market share to FedEx in the conventional ground market.

Meanwhile, analyst Helane Becker of Jesup & Lamont rates UPS a buy because "a recovery in 2010 will drive higher earnings." Her price target is $63, or 22 times her estimate for 2010 earnings of $2.84 a share. And Standard & Poor's analyst Jim Corridore estimates 2010 earnings of $2.50 a share. He writes, "UPS is seeing signs of improving business conditions and is effectively cutting costs (and) continues to generate strong free cash flows." His 12-month target is $65.

2 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs