UPS blames higher fuel costs, poor economy for 2Q earnings decline

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UPS today, July 22, reported a 6.7 percent revenue increase in the second quarter but an 18.3 percent decline in diluted earnings per share to $0.85 compared to $1.04 the prior year. Increasing fuel costs and a stagnant U.S. economy caused the earnings decline in both the U.S. Domestic and International Package segments, the company said. In contrast, the Supply Chain and Freight segment posted a substantial improvement in profitability.

“Although operating conditions in the second quarter were challenging, UPS firmly believes the long-term growth fundamentals for our company and for our industry are very favorable,” said Scott Davis, chairman and chief executive officer of Atlanta-based UPS. “We are helping our customers manage through this difficult period while doing everything we can inside UPS to adapt to current conditions.”

UPS said it earned $873 million in the second quarter compared to a profit of $1.10 billion for the same period a year ago, while revenue rose $13 billion from $12.2 billion. For the first half of the year, UPS said it earned $1.78 billion compared to income of $1.95 billion for the same period a year earlier, while six-month revenue grew 6.6 percent to $25.68 billion compared to $24.1 billion a year earlier.

For the three months ended June 30, UPS delivered consolidated volume of 959 million packages, essentially unchanged from the second quarter last year, and revenue per piece increased 5.9 percent.

“Even though economists do not predict a recovery until 2009, we anticipate that the second half of 2008 will generate modestly better results than the first half, assuming business conditions do not worsen,” said Kurt Kuehn, the company’s chief financial officer. “We are taking the necessary steps to control costs, add value for customers and grow our business while adjusting to the realities of today’s challenging environment.”