UPS Keeps Delivering

We are retaining our Buy on United Parcel Service, Inc. (UPS), as well as our $60 target price. UPS will report 4th quarter results on February 3.

We are cutting our 2008 diluted EPS estimate to $3.55 from $3.57, toward the lower end of UPS guidance of $3.50-3.70, and to $3.35 from $3.75 for 2009, as we have reduced our revenue and share repurchase estimates due to the global economic slowdown.

While the weaker economy, slowing volume gains, the shift away from premium products, increased fuel costs, and higher interest expense related to a $6.1 billion pension payment will be earnings drags, rate hikes, expansion into China, recent acquisitions, and share repurchases should propel EPS growth.

UPS reported third quarter diluted EPS of $0.96, down 9% year over year, but above the $0.89 consensus and our $0.90 estimate. Last year, UPS began a two-year, $10 billion share repurchase plan and announced a 7% increase in the dividend.

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