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UPS raises fourth-quarter outlook, to cut 1,800 jobs

The higher UPS forecast reflects improved shipping volume. (AFP)

By Reuters

United Parcel Service (UPS) raised its fourth-quarter profit forecast but said it was cutting another 1,800 management and administrative jobs.

UPS shares rose as much as 6.5 per cent to their highest level since the depths of the financial crisis in October 2008.

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 and besting Wall Street's view of a profit of 63 cents per share.

The higher forecast reflects improved shipping volume amid an economic recovery, while the elimination of 0.5 per cent of the firm's US workforce of 340,000 is the result of increased automation of management functions, analysts said.

Economists consider UPS and rival FedEx bellwethers for the US economy because they handle such a huge chunk of the nation's shipping. FedEx also raised its outlook before reporting fiscal second-quarter earnings in December.

Given the evidence of stronger volume, the UPS job cuts are not an indicator of economic weakness, Morningstar analyst Keith Schoonmaker said.

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

UPS said the cuts will come as it reorganises its domestic small package division, which handles boxes of 150 pounds (68kg) or less. It is cutting the number of regions to three from five and the number of districts to 20 from 46.

"They're not cutting sales jobs, they're cutting back office jobs," said analyst Helane Becker of Jesup & Lamont Securities. "They take out back office, they take out cost."

The eliminated workers, about 2.8 per cent of management, did such jobs as human resources, vehicle procurement and audit, spokesman Norman Black said. A combination of technologies that gives managers more complete information sooner makes it possible for a smaller number of them to run larger territories, Black said.

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


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