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UPS Shares Surge on Bright Outlook

ATLANTA ( TheStreet) -- UPS (UPS - Get Report) said it expects to exceed its previously announced estimate for fourth-quarter earnings, another sign that a recovery is under way. Shares took well to the news.

In early trading Friday, UPS stock was up $2.92 at $60.33.

The largest overnight package shipper said it now anticipates earnings between 73 cents and 75 cents a share in the fourth quarter. It previously projected earnings of 58 cents to 65 cents.

"The stronger earnings stem from better-than-expected results in both domestic and international operations and savings through cost management," said CFO Kurt Kuehn in a prepared statement. "However, we still anticipate a gradual economic recovery with improvement more evident as 2010 progresses."

UPS is considered to be an important economic indicator because 6% of the U.S. GDP and 2% of the world's GDP is in its system at any given moment.

Despite the improving economy, UPS also said it will offer voluntary separation packages to approximately 1,100 management and administrative employees, as it eliminates 1,800 positions in a restructuring of domestic management. Normal attrition is expected to accommodate the remaining losses of positions.

The restructuring will reduce the number of U.S. regions from five to three and U.S. districts from 46 to 20. The move "creates regions and districts that are better aligned geographically (and) will allow us to sharpen our focus on profitable growth," said CEO Scott Davis in a prepared statement.

A one-time charge for the restructuring, to be taken in 2010, will be offset by cost-savings, UPS said. The company will provide additional details during its fourth- quarter earnings call on Feb. 2.
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