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UPS 4Q profit nearly triples from year earlier

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UPS 4Q profit nearly triples from year earlier

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UPS is seeing more people using cell phones to buy and ship goods over the Internet, a greater number of customers paying for premium services like next-day air and businesses beefing up operations overseas.

That resulted in a fourth-quarter profit of $757 million, nearly triple the amount from a year earlier. The only blemish was UPS’ money-losing freight business, which ships larger items such as gym equipment, grand pianos and automobiles.

The world’s largest shipping carrier continues to position itself for an economic rebound, albeit a gradual one. UPS will again this year spend less money than it has historically on things like equipment, airplanes and trucks. It also is cutting jobs. Although, UPS said Tuesday it has enough money to give raises to managers.

The company forecast 2010 earnings within a range that’s consistent with Wall Street expectations.

“UPS has emerged from a very difficult year leaner, more focused and better positioned to take advantage of improving economic trends,” CEO Scott Davis told analysts during a conference call after the company reported its results.

Davis added, “And, we’re not standing still.”

UPS, based in Atlanta, was propelled to its strong performance in the final three months of 2009 by a good holiday shipping season and solid international business.

The profit for the October-December quarter was equivalent to 75 cents per share, compared with a profit of $254 million, or 25 cents per share, a year earlier.

Revenue fell 2.5 percent to $12.38 billion from $12.70 billion.

Analysts surveyed by Thomson Reuters were expecting a profit of 74 cents a share on revenue of $12.25 billion.

For 2010, UPS expects earnings per share to be within a range of $2.70 to $3.05. Analysts were expecting full-year 2010 earnings of $2.81 a share.

UPS said capital spending this year will total roughly $1.8 billion, well below the historical range, although up from $1.6 billion in 2009. The company is repositioning itself for a gradual economic recovery with improved technology and fewer employees. It’s cutting 1,800 management and administrative jobs, less than 1 percent of its global work force, in an effort to streamline its U.S. small package segment, which represents roughly 60 percent of annual revenue.

Executives didn’t announce any plans to boost share repurchases.

But Chief Financial Officer Kurt Kuehn said UPS is re-instituting management compensation increases after having frozen salaries for about 40,000 employees last year. He told The Associated Press in an interview that those managers who did not get raises last year will get them this year. He did not provide specifics, though he said such raises are typically in line with inflation.

Davis received total compensation valued at $5.2 million in 2008 — his first year at the helm of UPS. That was about 16 percent more than his predecessor received in 2007. Davis’ compensation for 2009 hasn’t yet been disclosed.

UPS and rival FedEx Corp. are viewed as economic bellwethers. They have seen signs of improving demand for shipping in recent months. But there is uncertainty about when the U.S. economic recovery will pick up speed.

Kuehn said the first quarter of this year will be the most challenging of 2010. That’s mostly because of the gradual nature of the economic recovery, Kuehn said. International growth is expected to continue to be a key driver for UPS’ results, he said.

FedEx in December reported a 30-percent decline in fiscal second-quarter earnings. FedEx, based in Memphis, Tenn., said then that the economy has “reached a turning point,” but a full recovery could still be a long way off.

In the fourth quarter, UPS’ package volume rose 1.4 percent to 1.1 billion pieces, while average volume per day was unchanged at 17.3 million packages. During the holiday shipping season, global volume exceeded 22 million packages on eight days, including two on which it exceeded 24 million packages. UPS said it experienced more delivery volume than in 2008 on each of the seven days before Christmas.

For the fourth quarter, air volume increased with next-air up 2.8 percent. However, ground volume per day was down 2.9 percent. Total U.S. average daily volume decreased 1.9 percent.

In the quarter, UPS introduced mobile applications for iPhone, iPod and BlackBerry devices. Executives said Internet buying and shipping is continuing to grow.

International operating profit jumped 27.6 percent. All regions experienced export volume growth, led by Asia and the United States, UPS said.

UPS, also known as United Parcel Service, also provides supply chain and freight services.

UPS’ freight unit, which expanded in 2005 with the purchase of trucking company Overnite Corp., posted an operating loss for the quarter. UPS cited an extremely competitive pricing environment in the less-than-truckload business.

Kuehn acknowledged UPS’ “timing wasn’t the best” in expanding its freight business. But executives said they believe UPS can make money in freight, and they did not indicate any plans to reduce or jettison that unit.

UPS’ logistics business recorded an increase in revenue in the quarter, driven by growth in the health care sector.

For all of 2009, UPS’ profit fell to $2.15 billion, or $2.14 a share, compared to a profit of $3 billion, or $2.94 a share, for all of 2008. Twelve-month revenue fell to $45.30 billion from $51.49 billion in 2008.

UPS shares rose 40 cents to $58.79 in morning trading.

On the Net:

UPS Inc.: http://www.ups.com

FILE – In this April 9, 2008 file photo, a UPS cargo plane is seen at Buffalo-Niagara International Airport in Cheektowaga, N.Y. Shipping giant UPS said Tuesday, Feb.2, 2010, strong operations during its peak holiday shipping season and solid international business propelled it to a fourth-quarter profit of $757 million that was nearly triple what it was a year earlier.(AP Photo/David Duprey, File)

© 2010 Associated Press. Displayed by permission. All rights reserved.

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