United Parcel Service, the world's largest package delivery company, reported a quarterly profit that beat estimates and forecast record-high profits in 2011, sending its shares up more than 4 percent.
Price increases last year and early this year, rising volume as the economy mends and technology that has boosted productivity are driving the company's performance, analysts said.
UPS is exiting this recession stronger and more nimble than ever, having streamlined operations and cut some rates when the economy slumped, Chief Financial Officer Kurt Kuehn said in an interview.
UPS handles goods equivalent to 6 percent of the U.S. gross domestic product (GDP) and 2 percent of global GDP in its trucks and planes, the company said, so its shipment trends give a tangible picture of consumer demand.
The company is a little more bullish on the U.S. economy, while global growth will be more spotty, Kuehn said. The rising tide is not lifting all boats and there are still some countries struggling with significant economic challenges.
UPS, which calls for moderate global growth in 2011, said it controlled costs as compensation and benefit expenses rose less than volume.
Despite all of the global macroeconomic fears -- whether it's fuel, Egypt, China slowing, inflation -- the global economy is growing, said Sterne Agee analyst Jeffrey Kauffman. These guys are at the epicenter of it and able to generate better margins on that growth today than they did last year or two years ago.
Sterne Agee sees UPS shares rising to $100 over the next 12 months, citing the company's ability to recapture costs by raising prices and internal controls.
The company's share were up 4.3 percent, or $3.08, at $74.73 in afternoon trading. Its shares last reached $75 in December 2007, a UPS spokesman said.
In less than two years from the recession, they already think they can exceed peak earnings, said BB&T analyst Kevin Sterling.
Atlanta-based UPS called the pricing environment rational and said increases imposed earlier this year have been reasonably well received. The company raised rates up to about 5 percent last year and did so again this year.
This is a combination of strong volumes, which are clearly a good indication for the U.S. and even the global economy, but also tells me that UPS is really getting pricing, and all that pricing leverage is flowing through to the bottom line, Sterling said.
Peak season holiday shipments between Thanksgiving and Christmas jumped to about 440 million, up from just above 400 million a year ago, powered by strong on-line orders from companies such as Amazon.com.
The strongest consumer spending in more than four years and robust exports spurred economic expansion in the fourth quarter, government data showed on Friday.
The momentum appeared to continue into January, with U.S. manufacturing growing at its fastest pace in nearly seven years while prices paid jumped more than expected.
UPS's fourth-quarter adjusted operating profit rose to $1.08 per share, up 44 percent from a year ago and topping the $1.05 per share expected by analysts, according to Thomson Reuters I/B/E/S.
The gain was 3 cents-per-share more when factoring in a gain from the sale of a logistics unit. Revenue rose to $13.42 billion from $12.38 billion.
UPS said revenue-per-piece shipped rose 3.5 percent in the quarter, mainly through higher base pricing and fuel surcharges. Average daily package volume rose 1.7 percent in the quarter as well.
Unusually harsh winter weather in the Unites States and Europe and rising fuel costs are seen as a temporary drag.
In the short-term our fuel surcharges lag and it will be a little bit of a headwind, but the surcharges catch up in a couple of months, Kuehn said. Our only real worry about fuel is that it breaks out and really begins to go up dramatically above $100 (a barrel) and beyond from about $91, and stifles economic growth.
Turmoil in Egypt and the possibility it could drive oil prices higher, is also a concern, he said.
UPS forecast $4.12 to $4.35 a share for this year, which would be up 16 percent to 22 percent from its 2010 adjusted results and would surpass its prior peak earnings set in 2007.
Analysts were expecting $4.18, on average for the year, according to Thomson Reuters I/B/E/S.
Shares of smaller rival FedEx Corp rose about 3 percent. FedEx in December also raised its fiscal full-year outlook on record holiday shipments, business in Asia and growth from emerging markets.
UPS's shares have gained about 20 percent in the past year.
UPS said it plans to repurchase about $2 billion of its shares this year, up from $800 million last year.
(Reporting by Lynn Adler, editing by Maureen Bavdek)