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United Parcel Service (UPS) is currently rated as a Fair Company in my analysis.  The numbers are excellent in certain areas of their operations but their P/E compared to their peers is lower than it should be.  Also, they could stand better growth in Sales as well as better employee productivity.

However, the company is better than many companies and I would never ridicule anyone for owning its stock. I just think there are better companies on the market.

UPS just posted very good returns. If they continue this pace and fix a few other portions of their business, then they will be a Good Company very soon.  The following is from Business First:

United Parcel Service Inc.’s fourth-quarter net income rose 198 percent behind a strong performance from its international package business.

Atlanta-based UPS (NYSE: UPS) said fourth-quarter net income rose to $757 million from $254 million a year earlier. Earnings per share increased to 75 cents from 25 cents during the same period.

UPS’s earnings in the fourth quarter of 2008 included a $548 million goodwill impairment charge in the UPS Freight unit and a $27 million impairment charge in its European package operations.

Fourth-quarter revenue declined 2.5 percent, to $12.4 billion from $12.7 billion. Revenue in UPS’s international package business increased 5.8 percent, to $2.8 billion from $2.7 billion. Revenue in the domestic package operations fell 5.5 percent, to $7.6 billion from $8 billion. Revenue in UPS’s supply chain and freight division fell 1.8 percent, to $2 billion from $2.1 billion.

A consensus of financial analysts polled by Thomson Financial Network had predicted earnings of 74 cents per share on revenue of $12.3 billion.

UPS, which operates its largest international air cargo sorting hub, Worldport, at Louisville International Airport, had an average daily shipping volume of 17.3 million packages per day in the fourth quarter, unchanged from the year-earlier period.

Domestic volume declined to an average of 14.9 million packages per day from 15.1 million packages a year earlier. International volume during the same period increased to 2.4 million packages per day from 2.2 million.

UPS ended 2009 with $2.1 billion in cash and short-term investments.

“UPS ended 2009 on a high note by leveraging network changes implemented throughout the year and executing flawlessly during the peak holiday shipping period,” UPS chairman and CEO Scott Davis said in a news release.

“The company demonstrated its ability to manage effectively in changing market conditions,” he said. “UPS has emerged from the worst recession in decades leaner, more focused and better positioned to take advantage of global trade.”

For the full year, UPS reported net income of $2.2 billion, or $2.14 per share, compared with $3 billion, or $2.94 per share, a year earlier.

Revenue declined to $45.3 billion from $51.5 billion.

For the full year, UPS delivered 3.8 billion packages, an average of 15.1 million per day, down from 15.5 million per day in 2008, according to the release.

UPS predicted full-year 2010 earnings in the range of $2.70 to $3.05 per share.

“Economic forecasts indicate gradual improvement as 2010 unfolds,” UPS Chief Financial Officer Kurt Kuehn said in the release. “The first quarter will be the most challenging of the year for UPS with profitability only slightly better than last year.”

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I picked this up over at iPhoneFreak. It is good to know that one of the major new products that Apple (one of our Good Companies) has a decent profit margin.

A recent report from BroadPoint AmTech analyst Brian Marshal suggests that Apple is going to be making more than $200 for every iPad they are able to sell. The range of profit appears to range from $208 on the $499 model and up to $446 on the $829 model.

“According to a bill of materials (BOM) analysis by Brian Marshall of BroadPoint AmTech, the cost of goods inside Apple’s 16GB Wi-Fi-only iPad totals $270.50. That figure includes a $10 line item dedicated to manufacturing, but doesn’t include another $20 set aside for under-warranty service costs. Adding the latter makes Marshall’s bottom-line total $290.50.”

Also interesting to note, but not surprising is that the display was the most expensive part on the list, coming in at $100. That however can be off-set by the lower price of the Apple A4 chip which was noted as being just $15. Other prices include the 16GB of memory and the aluminum casing both of which were $25 each.

This means the profit margin for the 16GB Wi-Fi only iPad is roughly 42.9%.

In terms of the 16GB Wi-Fi + 3G model, based on the same estimates that model is only costing Apple an extra $16 to make which means they will be making a higher profit on the +3G models. On the 16GB Wi-Fi + 3G model it was noted that the profit margin jumped up to 52%.

I caution you that just because the profit margin on this one product is good, it doesn’t mean the company will maintain as a good company to invest your money. The actions or inactions of its managers are the real drivers of solid performance.

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The money that you invest in stocks needs to be money that you don’t need immediately. This does not mean that it is not necessarily money that you won’t need for 20-30 years. If you have money that you are confident that you will not need for decades, you should probably invest that money in your own home. Follow the old Benjamin Franklin saying “A penny saved is a penny earned.”

If you currently pay 7% interest on your home loan, any extra money that you apply to your mortgage will immediately give you a 7% return for the balance of your mortgage time. Therefore if you pay a one-time extra $1,000 on a 7% mortgage that has 23 years left on it, then it will result in $5,002.04 that you didn’t have to pay over the course of the 23 years. This is an absolutely guaranteed return – over the course of 23 years you will be over $5,000 wealthier due to that one-time investment.

Your home mortgage is the safest “buy and hold” investment that you can make! You already know that you pay a certain percentage. If you pay the loan off early, you effectively make that loan percentage as an investment return.

Also, the same logic goes for your car loan and definitely your credit cards. This is typically more short-term debt than your home. Quick payoff on any short-term debt will guarantee you the quickest and best investment strategy simply because you do not spend those pennies, you save them. Benjamin Franklin will be proud of your efforts to quickly and efficiently pay off your short-term and long-term debt.

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Company name Infosys Technologies Limited (ADR)
Stock ticker INFY
Live stock price [stckqut]INFY[/stckqut]
P/E compared to competitors Fair

Management execution:

Employee productivity Poor
Sales growth Good
EPS growth Good
P/E growth Poor
EBIT growth Good

Analysis:

Confident Investor Rating Fair
Target stock price (high) $164.19
Target stock price (low) $41.24

Confident Investor comments: At this time, I think that a Confident Investor can cautiously invest in this stock as long as the price is correct. Most of the fundamentals of this company are good but there are some concerns.

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