This Day On The Street
Continue to site
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

UPS on Mend, but Holiday View Unclear

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 - Get Report) 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

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
FDX $165.25 0.00%
UPS $103.11 0.00%
AAPL $94.19 0.00%
FB $118.06 0.00%
GOOG $695.70 0.00%


Chart of I:DJI
DOW 17,651.26 -99.65 -0.56%
S&P 500 2,051.12 -12.25 -0.59%
NASDAQ 4,725.6390 -37.5850 -0.79%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs