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Union Pacific 3Q profit falls 13 percent as shipments slow
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OMAHA, Neb. (AP) — Union Pacific’s profit fell 13 percent in the third quarter because the railroad’s efforts to cut costs and improve productivity couldn’t offset a 6 percent decline in total freight.
Its stock fell more than 6 percent on Thursday after the railroad reported earning $1.13 billion, or $1.36 per share, in the quarter. That’s down from $1.3 billion, or $1.50 per share.
The 13 analysts surveyed by Zacks Investment Research expected earnings of $1.39 per share, on average.
Its revenue declined 7 percent to $5.17 billion in the quarter from $5.56 billion. The six analysts surveyed by Zacks expected $5.14 billion.
The railroad has about 2,700 employees on furlough and 1,500 locomotives in storage. But Edward Jones analyst Logan Purk said it’s disappointing that Union Pacific didn’t do more to cut costs given the declining demand.
Revenue from agricultural shipments grew 6 percent. All the other major freight categories declined, and coal led the way with a 19 percent drop.
“The macroeconomic environment still has its challenges — an unstable global economy, the relatively strong U.S. dollar and continued soft demand for consumer goods,” Union Pacific CEO Lance Fritz said. “However, certain segments of the economy, such as grain and energy, are showing signs of life.”
After several years of declining coal demand, Union Pacific officials think coal shipments may begin stabilizing and could grow a bit next year. Utilities nationwide have been switching to natural gas for several years because of its cheap prices and because of environmental regulations.
The Omaha, Nebraska-based railroad predicts its fourth-quarter volume will decline by a low-single-digit rate before rebounding to grow in 2017.
Citi analyst Christian Wetherbee said Union Pacific’s outlook is encouraging.
Union Pacific shares fell $6.48, or 6.7 percent, to close at $90.64 Thursday. Its shares are down more than 3 percent over the past year.