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Citigroup cuts UPS shares to 'Neutral'

NEW YORK (AP) -- Citigroup on Friday downgraded shares of United Parcel Service Inc. to "Neutral," saying that the company faces cost pressures and the stock is not as attractive after a recent rally.

The move came a day after the world's biggest package-delivery firm reported a fourth-quarter loss of $1.75 billion because of a pension-accounting charge.

Even without the pension issue, UPS' adjusted earnings of $1.32 per share were six cents below Wall Street expectations, and the company sounded a cautious note about the U.S. and global economies in 2013.

Citigroup Global Markets lowered its estimate of UPS' 2013 adjusted earnings to $5 per share from $5.25 per share on expectations of higher pension expenses.

Citi's Christian Wetherbee said that setting aside the pension issue, "the underlying earnings growth is slightly lower than expected."

The analyst said in a note to clients that because UPS shares have performed so well — just 4 percent below their 8-year high — "we feel further upside is limited," so the firm lowered the stock to "Neutral" from "Buy."

Citi still sees the company's fundamentals as sound, citing recent volume growth in key businesses such as next-day air delivery. But the company assumed U.S. economic growth of just 2 percent and worldwide growth of 2.5 percent.

UPS forecast a "relatively flat" first quarter and 2013 adjusted earnings of between $4.80 and $5.06 per share. That would be 6 percent to 12 percent higher than 2012, but it was below the $5.13 per share that analysts were expecting at the time of the forecast.

The shares, which fell 2.4 percent Thursday after the earnings report, regained some ground on Friday. They were up 42 cents to $79.71 in late afternoon trading on Friday. The stock rose 7.5 percent in January.