Through The Fly’s Eyes: United Parcel Service

from Louis Jacobs of Theflyonthewall.com

UPS-Teamsters Agreement May Sour Credit

United Parcel Service (UPS) has finally reached and agreement with the Teamsters Union over pensions and benefits. The five-year tentative agreement will allow the union to pay $6.1B to get greater control of worker benefits. The contract still has to be approved by the employees, but if approved, UPS will finally be able to achieve their goal of withdrawing from the Central States Fund.

UPS’ stock is down slightly on this news, down 0.5% to $75.53, off it’s 52-week high of $79.72.

Analysts deem this to be a good deal for UPS. Morgan Stanley’s William Greene said the new deal gets rid of any uncertainty that existed and that this could allow the company to “take a more aggressive approach to balance-sheet management, including more leverage to buy back shares.”

While analysts generally think this is a good deal for the company, credit rating agencies disagree. Standard & Poor’s downgraded UPS rating from “AAA” and placed it on “negative watch”. S&P said that the withdrawal payment and other benefit increases as part of the agreement could potentially lower UPS’ strong financial standing.

Overall, Wall Street remains skittish on the news, encouraged that the deal is finally done and there is potential for a buy back, but worried that this one-time payment will hurt their fiscal status. The stock will move in either direction depending on how the deal impacts UPS’s bottom line.