UPS Feels Gas Pinch With 21% Drop In Profits Despite Higher Sales

Atlanta, GA (AHN) -- With soaring gas prices and the sagging U.S. economy, UPS Inc., the world's largest shipping carrier, said Tuesday it's feeling the pinch as well with a 21 percent drop in its profit margin, despite a 6.7 percent increase in sales for the second quarter.

With an average daily volume decline in the U.S. and soaring fuel costs, UPS had a profit of $873 million, or 85 cents a share, in the second quarter, compared to a profit of $1.10 billion, or $1.04 a share, for the same period last year. Its revenue rose from $12.2 billion to $13 billion.

Though UPS is able to pass higher fuel costs on to customers as a fuel surcharge on shipments, those fees have not been able to keep pace with gas increases. UPS earned $1.78 billion, or $1.72 a share. That compares to a profit of $1.95 billion, or $1.82 a share, for the same period a year earlier. Six-month revenue rose 6.6% to $25.68 billion, compared to $24.1 billion recorded a year earlier.

UPS is hoping that if business conditions don't worsen, its second half will improve, but even so, is lowering its full-year earnings per share guidance. The company expects earnings per share for 2008 to be within a range of $3.50 to $3.70. Before the economy tanked, UPS had predicted earnings per share for the full year between $3.90 and $4.20 per share.