UPS Slashes Outlook on Soaring Fuel Costs

United Parcel Service warned that second-quarter earnings would be below expectations, blaming high fuel prices and a sluggish U.S. economy.

Chris Gardner / AP

Shares of UPS fell about 4 percent in extended trading on Monday.

The announcement came less than a week after rival package delivery company FedEx issued a weak fiscal 2009 forecast and posted a quarterly loss, also blaming rising fuel prices and an ailing economy.

UPS estimated earnings of 83 cents to 88 cents a share for the quarter, down from a prior view of 97 cents to $1.04 per share.

In a statement, UPS said U.S. package volume had been lower than expected, while demand for higher-priced air delivery services had seen a particular drop.

The company will report results on July 22.

It isn't just the package delivery companies that that warned that results will be hurt by rising energy and other commodity prices.

Earlier on Monday, United Air Lines said it was laying off nearly 1,000 pilots as it takes 100 aircraft out of service to deal with "record high oil prices and a softening U.S. economy." It warned its competitors "are facing similar decisions in response to this unprecedented environment."

In May, farm equipment leader Deere forecast disappointing full-year earnings, blaming global steel prices that its chief finance officer said were "racing ahead" of expectations.

But given the out-sized role that fuel plays in haulers' expenses, freight and package haulers are especially feeling the pinch.

Adding pressure is the slowdown in the U.S. economy, which has depressed business activity and left too many truckers chasing too little freight.

That's forced many independent truckers—and some bigger outfits—to file for bankruptcy protection.

Among the victims: Jevic Transportation, a so-called less-than-truckload shipper, an owned affiliate of private equity firm Sun Capital, which filed in May.

As a result, truckmakers like Paccar are seeing weak demand for their pricey big rigs this year.

That weakness helped push Caterpillar to announce earlier this month that it would stop making diesel engines for the North American commercial vehicle market after 2009, ending a nearly 50-year-long chapter in its history that made the company a part of American trucker lore.

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