UPS raise Q4 forecast whilst shedding jobs

UPS raised its fourth-quarter profit forecast on Friday and said it would cut 1,800 management and administrative jobs, reports Reuters. The article continues:

The shipper expects fourth-quarter earnings of 73 cents to 75 cents per share, up from an earlier estimate of 58 cents to 65 cents.

The higher forecast reflects the improved shipping volume, both international and domestic, of an economic recovery, said Morningstar analyst Keith Schoonmaker.

UPS rival FedEx also raised its outlook before reporting fiscal second-quarter earnings in December.

Economists consider FedEx and UPS bellwethers for the US economy because they handle such a huge chunk of the nation’s shipping.

Schoonmaker said that given the evidence of stronger volume, the UPS job cuts are not an indicator of economic weakness.

“I look at it as an efficiency gain,” Schoonmaker said. “UPS is reaping the benefit of its investment in technology.”

UPS said the cuts will come as it reorganises its domestic small package division. It is cutting the number of regions to three from five and the number of districts to 20 from 46.

The US economy shed 85,000 jobs in December, leaving the unemployment rate unchanged at 10%, the Labor Department reported on Friday.

UPS said it expects a one-time charge in 2010 as a result of the restructuring, but this will be offset by savings in the small package business.

The company is due to report quarterly earnings on February 2. UPS shares were up 5.7 percent at $60.71 in morning trading. FedEx shares were up 1.8% at $84.43.

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