UPS warns on profit as customers cut costs

United Parcel Service Inc, the world's No.1 package delivery company, estimated second-quarter profit below market expectations as international customers accelerate their shift from aircraft to slower but cheaper ships.

UPS shares fell 5 percent after the company also cut its full-year earnings forecast to $4.65-$4.85 per share from $4.80-$5.06. Shares of rival FedEx Corp fell 2 percent.

UPS and FedEx, the No.2 package shipper, are considered economic bellwethers because of the massive volume of goods they move around the world.

FedEx said in June it was raising shipping rates and cutting jobs and costs.

UPS's stronger North American domestic ground network puts it in a better position than FedEx, which focuses more on international air shipments.

UPS said on Friday it expected to report second-quarter earnings of $1.13 per share. Analysts on average expected $1.20 per share, according to Thomson Reuters I/B/E/S.

The company said its package volume growth had also slowed due to labor negotiations. It said it had extended an agreement that covers its domestic small-package employees with the International Brotherhood of Teamsters. ()

The company is scheduled to report second-quarter results on July 23.

UPS shares were trading at $86.55 before the bell, while FedEx was trading at $102.00.