OMAHA, Neb. – Union Pacific’s second-quarter profit fell 19 per cent as the railroad hauled 11 per cent less freight.
The railroad said Thursday that full-year volumes are likely to fall 6 per cent to 8 per cent because of the soft global economy, strong U.S. dollar and weak consumer demand.
Its shares fell more than 3 per cent in afternoon trading.
The Omaha, Nebraska-based company reported net income of $979 million, or $1.17 per share. That’s down from $1.2 billion, or $1.38 per share, a year ago.
The 14 analysts surveyed by Zacks Investment Research predicted earnings of $1.17 per share on average.
Revenue declined 12 per cent to $4.77 billion. Five analysts surveyed by Zacks expected $4.79 billion.
Union Pacific said shipments slowed in every category except agricultural goods. Coal again led the declines with a 21 per cent drop in shipments.
Union Pacific CEO Lance Fritz said consumer behaviour remains puzzling because there are mixed signals of low unemployment and strong car sales contrasting with slow housing construction and weak spending.
“Consumers are presenting a real conundrum to us,” Fritz said.
The railroad cut expenses 11 per cent to $3.1 billion in the quarter in response to the slower volume. Union Pacific’s workforce is down 12 per cent from last year, and it has stored 14 per cent of its locomotives as it works to improve efficiency.
Edward Jones analyst Logan Purk said Union Pacific’s results were OK given the economic environment, but the railroad suggested things could get worse if the economy doesn’t improve.
“They seem to be the first to draw out that consumer demand is weak,” Purk said. “Given that’s a bright spot many refer to in the economy, if your consumer is starting to crack, it’s certainly not good.”
Union Pacific shares fell $2.95, or 3.1 per cent, to $91.17 in afternoon trading. Its shares have fallen almost 8 per cent over the past year.
Union Pacific Corp. operates 32,400 miles of track in 23 states from the Midwest to the West and Gulf coasts.
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Elements of this story were generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on UNP at http://www.zacks.com/ap/UNP
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Keywords: Union Pacific, Earnings Report, Priority Earnings
