United Parcel Service Inc. (NYSE: UPS) cut its second-quarter and full-year earnings guidance this morning, citing overcapacity in the air freight market, a slowing U.S. economy and customers who are choosing cheaper ways to ship goods. The company said it is “adapting” to the current conditions.

UPS’s main competitor, FedEx Corp. (NYSE: FDX), got a shot in the arm earlier this week, when activist investor Bill Ackman of Pershing Square Capital Management, indicated that he is raising a $1 billion fund to go after a large-cap, publicly traded company. FedEx was believed to be the target and shares have gained nearly 6% since then. UPS shares have risen about 3% on FedEx’s coattails.

UPS now expects second-quarter earnings per share (EPS) of $1.13, compared with a consensus estimate of $1.20. The freight carrier also set a full-year EPS target of $4.65 to $4.85, well below the consensus estimate of $4.98.

The shipping industry has been fighting overcapacity issues for at least two years now with little success. Too many ships or planes are a significant anchor dragging on profits. Coupled with customers looking for the cheapest possible method of shipment and a global economy that is barely breathing, UPS faces some significant hurdles.

Shares of UPS are down 5.7% in the first half-hour of trading this morning, at $86.24 in a 52-week range of $69.56 to $91.78.

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