UPS: CEO declares an end to the recession

"It looks like this recession is finally over and believe it or not, that makes 21 that UPS has successfully managed through," Davis told analysts.

The company, which was founded in 1907, will restore raises to about 40,000 managers at a cost of $100 million, chief financial officer Kurt Kuehn told The Atlanta Journal-Constitution.

Still, the company is proceeding with a plan to eliminate 1,800 positions, in part by asking 1,100 management and administrative employees to retire early.

The move will cost the company about $80 million in the first quarter of 2010, but produce annual savings of about $160 million to $170 million, starting in 2011. The benefit won't be felt in 2010 as employees are moved and retrained, Kuehn said.

"The constraint in employee hiring has been a part of our reaction to the challenges of the recession," Kuehn said. "Our overall employee headcount is down about 4 percent year over year."

UPS currently employs 408,000 worldwide, of which 10,000 are in metro Atlanta, including package operations and the Sandy Springs corporate headquarters.

The fourth quarter is typically UPS's strongest due to the holiday shipping season.

As it turns out, holiday shipping exceeded the company's conservative predictions and led to more seasonal hiring.

"We did lay out some goals for holiday season, but frankly we were a little nervous that consumers might not show up," Kuehn said. "But there was demand, especially later in the season."

In 2009, global volume during the holidays exceeded 22 million packages a day for six days and 24 million packages a day for two days. The numbers were better than both 2007 and 2008, when global volume exceeded 20 million packages a day for just five days.

Overall in 2009, UPS's revenue shrank $6.2 billion to $45.3 billion, compared to $51.5 billion in 2008. Earnings for the year were $2.14 per share, 80 cents less than 2008. Profit in 2009 was $2.2 billion, a 28 percent decrease from 2008.

The biggest hit to operating profit last year came in the U.S. domestic package business. Declines in package volume caused revenue to decline 10 percent, with operating profit declining 45 percent for the year.

"We're glad to say goodbye to 2009," said Kuehn, when asked about that number.

Fourth quarter revenue was better than initially expected, or $12.4 billion, down 2.5 percent from the fourth quarter a year ago. Net profit in the quarter was $757 million, down 8.7 percent. Excluding one-time charges from earnings in the fourth quarter of 2008, UPS's profit was up nearly 200 percent.

Quarterly earnings were 75 cents per share. Analysts listed on Bloomberg had expected 72 cents per share. Earnings were in line with the company's recently increased forecast of 73 to 75 cents per share.

The international division buoyed the company's returns in the fourth quarter. UPS shipped about 200,000 more packages per day overseas compared to a year ago, which boosted the international unit's operating margin to 16.7 percent and operating profit to $467 million.

UPS is considered an economic bellwether because it moves the goods that manufacturers, retailers and shoppers consume. The company still has the largest U.S. share of the express and ground market compared to rivals FedEx and the U.S. Postal Service, according to SJ Consulting Group Inc.

In 2009, UPS had 53.2 percent of the market by revenue and 49.7 percent by volume, according to the data, compared to FedEx's 31.5 percent and 27 percent, respectively.

"One of our big questions for 2009 was, will that [fourth quarter] momentum continue?" Kuehn said. "We feel fairly confident this will be a gradual recovery. Right now, we expect sequential improvement quarter over quarter."

Analysts in general liked UPS's outlook. David Ross with Stifel Nicolaus, said the stock is fairly valued and kept his "hold rating." Another, Ed Wolfe with Wolfe Research, believes that investors will be rewarded as UPS ratchets down its capital investment to lower levels after completing big projects over the last few years, such as expanding the air hub in Louisville, Ky., and building new hubs in China.

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