United Parcel Service Inc., the world's largest package-delivery company, lowered its second- quarter profit forecast because of rising fuel costs and a slowing U.S. economy.
Earnings will be 83 cents to 88 cents a share, down from a range of 97 cents to $1.04, Atlanta-based UPS said today in a statement. The average estimate of 16 analysts surveyed by Bloomberg was 98 cents.
UPS said the ``anemic'' economy was causing customers to cut back on air shipments, its most profitable offering, and that international packages coming into the U.S. were also declining. Jet-fuel costs have jumped 30 percent this quarter, and UPS has a two-month lag in recovering those expenses through surcharges, Chief Financial Officer Kurt Kuehn said in a telephone interview.
``The single biggest factor on this was jet fuel,'' Kuehn said. ``It's hard to compensate for that until things even out and calibrate a little bit.''
UPS's fuel surcharges for air shipments will increase to 32.5 percent in early July, up from 28 percent now, according to its Web site. Kuehn said the second quarter will be the year's ``most challenging'' because of the run-up in jet fuel.
UPS fell $2.80, or 4.2 percent, to $63.55 at 5:35 p.m. following the close of regular New York Stock Exchange trading. Earlier, the stock had declined less than 1 percent to $66.35.
The U.S. economy is still ``very sluggish'' and manufacturing ``continues to deteriorate,'' Kuehn said.
Today's move marks the fourth time UPS has reduced its quarterly earnings outlook since the company's initial public offering in 1999, spokesman Norman Black said in an e-mail message.
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