ATLANTA — United Parcel Service Inc., the world’s No. 1 package delivery company, on Friday said second-quarter earnings fell as domestic package volume was hurt by economic uncertainty and its unsettled labor situation, according to a wire service.
UPS, which earlier this week said it was losing business to rivals because it had not yet reached a contract settlement with the International Brotherhood of Teamsters, said earnings fell 3 percent, to $611 million, or 54 cents per share, from $630 million, or 55 cents per share, a year earlier.
Wall Street analysts on average had expected it to earn 54 cents per share, according to research firm Thomson First Call. On Wednesday, the company affirmed its earnings would come in a range of 50 cents to 55 cents a share.
Total revenue rose 2.5 percent, to $7.68 billion from $7.49 billion a year before. That is somewhat shy of the average analyst’s revenue expectation of $7.81 billion, although it is within the range of estimates, according to Multex, another earnings tracking firm.
The revenue increase was driven by international growth, while domestic results lagged.
U.S. shipments fell, particularly toward the end of the quarter as customers moved business to arch rivals such as FedEx Corp. (NYSE:FDX – News) and Airborne Inc. (NYSE:ABF – News) on concerns UPS may face a Teamsters strike such as the one that crippled it five years ago.
The Atlanta company’s contract with 230,000 Teamsters expires on July 31. Union members have already voted to authorize a strike, although a walkout date has not been set.
Earlier this week, Teamsters’ officials said the union and company were still far apart on key issues such as pensions, health care benefits and wages.
“Clearly the contract talks and the continuing weakness in the U.S. economy reduced earnings in the domestic business,” UPS Chief Financial Officer Scott Davis said in a statement.
UPS is anxious to avoid a crippling strike like the one it endured in 1997. Then, International Brotherhood of Teamsters members walked off the job in a contract dispute, shutting down UPS for 15 days, shaking the nearly century-old UPS’s record for reliability, and costing it $750 million in lost revenue.
The company released its results earlier than scheduled because of this week’s announcement that it would be added to the Standard & Poor’s 500 index, it said in a statement. The early disclosure will allow it to issue up to 32.5 million new shares in a secondary offering at the same time it joins the index at the close of trading on July 19.
The offering, principally to index funds, will help meet new demand for the stock upon its inclusion in the benchmark index.
UPS shares closed Thursday at $62.50 on the New York Stock Exchange, backing off 19-month highs hit on Wednesday, the first day of trading following the S&P announcement.
Stocks added to the S&P 500 often get an initial boost as institutional investors who manage funds that track the index buy shares in the new components, bumping up demand for the stock.
Goldman Sachs is acting as lead underwriter of the stock offering, UPS said.