In UPS warning, one of the last hopes fails

When UPS (NYSE: UPS) warned on earnings, no one should have been surprised, but it was something of a death of hope. Rival Fedex (NYSE: FDX) has already said it would be a bad year. UPS waited a week. Then, it admitted higher fuel prices and slowing customer orders were doing it substantial harm.

According to MarketWatch, "The package-delivery giant cut its second-quarter profit forecast to a range of 83 cents to 88 cents a share. In late April, UPS had expected to earn between 97 cents and $1.04 a share." At least the company will make money.

Perhaps that is the key. At least it will make money.

Even with skyrocketing oil prices, many large US companies have done such a good job driving up productivity over the last year that they can do relatively well as inflation undermines their gross margins. It is that productivity which may save some large American firms from disaster and keep stronger companies in a relatively good position.

The Bureau of Labor Statistics revised Q1 productivity upwards to 2.4%. This makes it less necessary for business to raise worker compensation. That, in turn, keeps costs down.

And, companies like UPS can still make money.

Douglas A. McIntyre is an editor at 247wallst.com.