S&P cuts UPS' outlook to negative

[cheryl]

S&P cuts UPS' outlook to negative - Marketwatch
Standard & Poor's Ratings Services on Tuesday lowered United Parcel Service Inc.'s /quotes/comstock/13*!ups/quotes/nls/ups long-term rating outlook to negative from stable and affirmed its AA- rating. "The ratings assume that UPS' focus on improving yields, cutting costs, and a gradual recovery in market conditions, combined with management's commitment to restoring credit metrics, will enable the company to generate FFO to total debt of at least 40% over the next 18 to 24 months," said Christopher DeNicolo, an S&P credit analyst. However, the ratings agency warned that it may downgrade its ratings if the parcel delivery company fails to meet this criteria over the next couple of years.

 

[UPS Lifer]

Not quite sure why S & P would take this approach especially after the SPR. I am lost on this one! Sometimes I think that UPS stock is doomed to stay below $60 a share.

 

[clueless]

Here's the actual ratings action from S&P:

Ratings On United Parcel Service Inc. Affirmed; Outlook Revised To Negative

United Parcel Service Inc.'s (UPS) credit metrics have deteriorated over
the past year due to profit pressures related to the global economic
downturn and a large increase in unfunded postretirement obligations.
In response, the company has taken measures to cut costs and improve
operating performance. It also has curtailed share repurchases to bolster
its financial profile.

We are affirming the ratings on UPS, including the 'AA-' corporate credit
rating and 'A-1+' commercial paper rating.

We are also revising the outlook to negative from stable to reflect our
intention to lower ratings if funds from operations (FFO) to total debt
(adjusted for off-balance sheet items) fails to improve to at least 40%
over the next 18 to 24 months. Over the longer term, we expect FFO to
total debt to return to the 50% level.

NEW YORK (Standard & Poor's) Jan. 26, 2010--Standard & Poor's Ratings Services
today affirmed its ratings on United Parcel Service Inc. (UPS), including the
'AA-' corporate credit rating and 'A-1+' commercial paper rating. We also
revised the long-term rating outlook to negative from stable.

The ratings on Atlanta-based UPS reflect its very strong position in
ground parcel delivery and substantial earnings and cash flow. UPS' adoption
in early 2008 of a somewhat more aggressive (albeit still conservative)
capital structure, and its participation in a competitive industry with some
exposure to cyclical demand pressures somewhat offset these strengths. UPS
benefits from its position as the leading provider of ground package delivery
in the U.S. and from its significant presence in domestic air express package
delivery, international package delivery, and logistics services.

"The ratings assume that UPS' focus on improving yields, cutting costs,
and a gradual recovery in market conditions, combined with management's
commitment to restoring credit metrics, will enable the company to generate
FFO to total debt of at least 40% over the next 18 to 24 months," said
Standard & Poor's credit analyst Christopher DeNicolo. Failure to do so could
result in rating downgrades. "We could revise the outlook back to stable if
these actions result in FFO to total debt improving to 40% and we believe it
will stay there and approach the 50% area," he continued.

http://www.standardandpoors.com/prot/ratings/articles/en/us/?assetID=1245205388803

 

[Brown Wrench]

This is typical for the financial market folks. As everyone knows, the stock brokerage houses, stock brokers and traders all fail to make money if we don't trade our shares. Hence the constant upgrade and downgrade of ALL stocks. It entices those who don't base their decisions on their own research, but the word of analysts that are paid to change their opinions on stocks!! Viola, downgrade=everyone sells=the brokers make bank, upgrade, everyone buys so they can sell next time the stock is downgraded!!
If no one would have panicked last year, the markets would have been stable.. Amazing but true!!!

 

[UPS Lifer]

This is typical for the financial market folks. As everyone knows, the stock brokerage houses, stock brokers and traders all fail to make money if we don't trade our shares. Hence the constant upgrade and downgrade of ALL stocks. It entices those who don't base their decisions on their own research, but the word of analysts that are paid to change their opinions on stocks!! Viola, downgrade=everyone sells=the brokers make bank, upgrade, everyone buys so they can sell next time the stock is downgraded!!
If no one would have panicked last year, the markets would have been stable.. Amazing but true!!!

This makes a lot of sense. The brokers make money whether you sell or buy.