ATLANTA ( TheStreet) -- Among the "problems" that UPS UPS ( UPS) faces is deciding what to do with its excess cash.

"We are going to be back soon hopefully to that problem of what to do with excess cash generation," said CFO Kurt Kuehn, during an earnings conference call on Tuesday. "We have no intentions of building a large hoard of cash."

Kuehn said the company will look at a share-repurchase: a dividend increase is also possible. "We did redistribute 100% of net income last year," he noted.
UPS

The company's strong position reflects both increased revenue and reduced spending. Capital expenditures, set for $1.8 billion this year, will be below their historic range for the next few years, thanks to completions of two hubs in China, expansion of the Louisville hub and recent upgrading of the aircraft fleet.

Meanwhile, the recession has ended, shipping volumes are up and, as it cycles through the contracts it negotiated in a recession, UPS sees opportunity. "During the depths of the recession, there were huge pressures on pricing," Kuehn said. "We think perhaps we should be charging a little higher (but) it takes a year or so at least to cycle through contracts."

One more positive note on the earnings side: UPS envisions a gain of 10 cents a share, beginning in 2011, from reduced costs resulting from the elimination of 1,800 positions. Current-year savings will be minimal due to the cost of offering separation and relocation packages to about 1,100 workers.

Looking ahead, UPS said it expects to earn between $2.70 and $3.05 a share in the current year, an increase of 17% to 32% over 2009 results. Analysts were estimating $2.81. In 2010, "we see a story of a gradually firming economy with pricing for UPS continuing to get stronger and stronger, and ultimately this restructuring (savings) beginning to kick in late this year," Kuehn said.

Still, UPS is cautious on the first quarter. Why? Because companies that print money know they can afford to be conservative. In this case, UPS has chosen not to extrapolate all of its fourth-quarter gains into the first quarter.

"Momentum may slow a bit" after a surprising December uptick that included a holiday rush with eight days of transporting more than 22 million packages, Kuehn said. Additionally, it is unclear whether unprecedented demand in Asia will continue.

In the fourth quarter, net income was $757 million or 75 cents a share. Analysts surveyed by Thomson Reuters had estimated 74 cents. Revenue declined 2.5% to $12.38 billion. Analysts had estimated $12.2 billion. UPS pre-reported on Jan. 8 that it would earn between 73 cents and 75 cents a share. Its original guidance was 58 cents to 65 cents a share. In the same quarter a year earlier, UPS earned $254 million or 25 cents a share.

Standard & Poor's analyst Jim Corridore reiterated a buy on UPS Tuesday, saying "with lower capex over the next few years, UPS should generate significant free cash, which we think will lead to increased share repurchase activity." Shortly before midday, UPS stock was trading up 18 cents at %58.57.

-- Written by Ted Reed in Charlotte, N.C. .

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