Union Pacific 3Q profit falls 13 per cent as shipments slow

OMAHA, Neb. – Union Pacific’s profit fell 13 per cent in the third quarter because the railroad’s efforts to cut costs and improve productivity couldn’t offset a 6 per cent decline in total freight.

Its stock fell more than 6 per cent 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 per cent 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 per cent. All the other major freight categories declined, and coal led the way with a 19 per cent 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 per cent, to close at $90.64 Thursday. Its shares are down more than 3 per cent over the past year.


Elements of this story were generated by Automated Insights ( using data from Zacks Investment Research. Access a Zacks stock report on UNP at


Keywords: Union Pacific, Earnings Report, Priority Earnings