UPS says 2Q profit down 4 percent

DALLAS (AP) -- UPS said Tuesday that second-quarter profit fell 4 percent as customers shifted from premium toward lower-priced shipped services.

The company called the results disappointing and said it was adapting to the changing market.

United Parcel Service Co. said that it earned $1.07 billion, or $1.13 per share, down from $1.12 billion, or $1.15 per share, a year earlier.

The big delivery company tipped off investors about the headline number last week, so analysts were expecting the lower earnings per share.

Revenue rose 1.2 percent to $13.51 billion but was lower than expected. Analysts had forecast $13.59 billion, according to a FactSet survey. Costs rose 2 percent.

UPS shares tumbled on July 12 after the company foreshadowed the quarterly results and lowered its full-year outloook. It blamed the shift toward slower but cheaper shipping services, overcapacity in the worldwide air freight business, and slowing in the U.S. industrial sector.

The effect of those changes showed up in disappointing performance in the company's freight-forwarding and international package-delivery businesses. The company's supply chain and freight unit earned 21 percent less in operating profit than a year ago.

"Market conditions and shipper preferences clearly impacted our freight forwarding and international business," Chairman and CEO Scott Davis said in a statement. "UPS is adapting to these conditions to ensure we deliver a solid second half."

Atlanta-based UPS and rival FedEx Corp. are being hurt as many customers trade down from priority shipping services to save money. UPS officials expect the trend to continue.

UPS, with a fleet of jets and an armada of brown trucks, delivered 15.7 million packages a day during the quarter, up 2.3 percent.

Shares of UPS closed Monday at $87.61, down 47 cents. They are up 19 percent for the year.