<p>UPS Inc. shares plunged 15 percent Tuesday after the world's largest shipping carrier reported an increase in second-quarter profit that missed Wall Street expectations and warned its earnings growth for the year will be at the low end of its forecast.</p><p>Hurt by high fuel, rail, health care and pension costs, the Atlanta-based company said it earned $1.06 billion, or 97 cents a share, for the three months ended June 30, a 7.6 percent increase from the profit of $986 million, or 88 cents a share, for the same period a year ago.</p><p>Analysts surveyed by Thomson Financial were expecting earnings of $1 a share.</p><p>Revenue in the quarter rose 15.2 percent to $11.74 billion, up from $10.19 billion a year earlier. Analysts expected UPS to post quarterly revenue of $11.6 billion.</p><p>Shares of UPS fell $12, or 15 percent, to $68 in midday trading on the New York Stock Exchange, toward the low end of its 52-week range of $66.75 to $83.99.</p><p>"The market's going to do what the market's going to do," Chief Financial Officer Scott Davis said in an interview.</p><p>Davis said UPS reported solid earnings despite "unexpectedly higher fuel costs."</p><p>"We feel pretty good about the outlook right now," Davis said. "We'll be fine long-term."</p><p>In a conference call with investors, Davis said fuel surcharges the company imposed lagged real costs by six weeks, and UPS had capped fuel surcharges in April and May but removed the cap in June.</p><p>He also said the company was affected by increased rail, health care and pension costs. Davis said a slowing economy had only a "slight impact" on UPS' results.</p><p>"It is a factor," Davis said of the economy. "We expect it to moderate." But, he added, "We still expect small package growth to be growing faster than the economy."</p><p>UPS spent $668 million on fuel in the second quarter, compared to $465 million spent in the same period a year ago, Davis said.</p><p>UPS said it now expects earnings per share to be in a range of 87 cents to 91 cents in the third quarter compared to 86 cents a share reported for the prior-year period. The third quarter will have fewer operating days than a year earlier, negatively impacting earnings per share comparison roughly 4 cents a share to 5 cents a share, UPS said.</p><p>The company also said that it expects full-year earnings growth to be at the low end of the company's original estimate of 11 percent to 16 percent growth for 2006.</p><p>UPS said second-quarter daily ground volume increased 4.6 percent, while average daily volume for next-day air rose 4.2 percent. Total international package volume grew 16.5 percent, UPS said, even though there were three fewer operating days in Europe than in the same quarter last year.</p><p>For the first six months of the year, UPS, also known as United Parcel Service, earned $2.04 billion, or $1.86 a share, compared to a profit of $1.87 billion, or $1.66 a share, for the same period a year ago. Six-month revenue rose 15.8 percent to $23.26 billion from $20.08 billion a year earlier.</p><p>___</p><p>On the Net:</p><p>HASH(0x1cdc0a8)</p>
