High gas prices and a hurting global economy pushed United Parcel Service (UPS) profits down in the third quarter. The package delivery company, which recently announced shipping-rate hikes, reported a net income of $970 million, a 9.9% drop from $1.08 billion in the same quarter last year.
UPS’s chief financial officer, Kurt Kuehn, said the business environment “proved substantially worse than we initially anticipated, with significant slowing toward the end of the quarter.”
He added that the company expects overall 2008 earnings per share to be around “the lower end” of its mid-year forecast of $3.50 to $3.70, based on “very conservative” consumer spending in the forecasted challenging economic environment.
UPS also reported diluted earnings per share of 96 cents for the third quarter, a decrease from $1.02 in the same quarter of 2007. This is higher than the 89 cents per share expected by analysts polled by Thomson Reuters.
However, Chairman and CEO Scott Davis said the company continues to see growth in international and supply chain businesses and is controlling costs, while making investments that will help UPS come back stronger when the economy rebounds. "UPS managed the business well in this very tough economic climate.”
Shipping companies have been affected by the global economic downturn as well as high gas prices, causing them to tighten budgets. Competitor FedEx (FDX) also reported a drop in earnings per share in its quarterly release last month, as it cut costs.
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