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UPS profit falls as global customers use cheaper shipping

A United Parcel Service (UPS) logo is seen on a car in center of Warsaw January 16, 2013. REUTERS/Kacper Pempel
A United Parcel Service (UPS) logo is seen on a car in center of Warsaw January 16, 2013. REUTERS/Kacper Pempel

(Reuters) - United Parcel Service Inc on Tuesday posted a smaller quarterly profit as customers, especially on international routes, chose slower, cheaper shipping services.

Earlier in the month, UPS said it expected to report a quarterly profit below analysts' expectations due to a weak U.S. industrial economy, customers switching to less expensive shipping options and overcapacity in the global air freight market.

UPS is considered an economic bellwether, along with rival FedEx Corp , because of the high volume and variety of goods they move around the world.

For the second quarter, UPS, the world's No. 1 package delivery company, said export shipments rose 5 percent, but because customers used more normal delivery services instead of express options, export revenue fell 3.4 percent.

In the domestic market, daily package volume improved 1.9 percent from the same period last year as more customers shopped online. Total U.S. domestic revenue per piece was up 0.3 percent.

Globally, manufacturers are dealing with a number of headwinds, including a weak U.S. economic recovery, slowing growth in China and recession in Europe.

Manufacturers and retailers have also become more savvy with their supply chains, planning shipments strategically to cut back on express shipping. This reduces costs for manufacturers, but hurts courier companies like UPS, which make more money on faster shipping.

For the quarter, UPS earned $1.07 billion, or $1.13 a share, in the second quarter, compared with $1.12 billion, or $1.15 a share a year before.

Total revenue increased 1.2 percent to $13.51 billion.

UPS shares closed at $87.61 Monday on the New York Stock Exchange.

(Reporting by Nivedita Bhattacharjee in Chicago; Editing by Jeffrey Benkoe)