UPS Earnings Show Improving US Economy: Analyst
Special to CNBC.com
United Parcel Service delivered strong fourth-quarter earnings and a sign the U.S. economy is improving, Morgan Keegan managing director Art Hatfield told CNBC Tuesday.
Based on the shipment volume level, which includes holiday shipments, "we’re seeing slight improvement on a sequential basis in the U.S. economy, and I think that’s something that we should expect going forward," he said. "I think the volumes we’re seeing are very consistent with a 2.5 percent to 3 percent GDPnumber [in 2012] right now."
Earlier Tuesday, UPS reported earnings excluding a one-time charge of $1.28, 2 cents higher than estimates, and gave a 2012 profit target of $4.75 to $5 a share.
Hatfield said the biggest problem facing UPS is bad weather, but "we haven’t seen that this winter and so I would suspect that first-quarter numbers look good, and the guidance they gave for 2012 is very good."
Hatfield said UPS and competitor FedEx have "strengthened their positions globally and will have better pricing power going forward. That’s going to create a lot of shareholder value" that can be passed back to investors, as a share repurchase or a dividend.
Jeff Kauffman, transportation analyst at Sterne Agee, also likes both shipping companies, but he thinks UPS has the stronger cash flow and "slightly more attractive" valuation.
"We tell people to buy both" stocks, he told CNBC in a separate interview. "It’s like trying to differentiate Coke and Pepsi...We’re talking about two global brands taking the market share in every market of the world."
Business should be even better as the U.S. Postal Service shrinks and "you have both companies gaining in the e-commerce world domestically," plus taking a larger share of the market in both Europe and Asia.
Additional News: UPS Profit Tops Street view, Sees 2012 Growth
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Art Hatfield does not own shares but a Morgan Keegan affiliate received compensation for products or services other than investment banking in the past 12 months. Jeff Kauffman does not own shares but Sterne Agee makes a market in UPS stock. No information was given about FedEx.