Union Pacific Profit Falls On Lower Freight Volumes, But Tops Estimates

(RTTNews) - Railroad operator Union Pacific Corp (UNP), on Thursday reported a decline in second-quarter profit, hurt by lower freight volumes, partly offset by higher rates from customers. However, earnings for the quarter topped Wall Street estimates, while revenues fell short of expectations. Union Pacific shares slid more than 4 percent in morning trade on the New York Stock Exchange.

The company also indicated full-year profit to be not higher than 2014's earnings of $5.75 per share, even as analysts currently expect earnings of $5.82 per share in 2015.

"Solid core pricing gains were not enough to overcome a significant decrease in demand," said CEO Lance Fritz in a statement.

"While the volume outlook remains uncertain, we remain laser focused on operating safely and efficiently no matter what the market environment," Fritz added.

The company said it suffered a 6 percent slump in volumes in the second quarter quarter, led by a sharp decline in coal. The company expects freight volumes to remain down during the second half of the year.

Industrial products and agricultural products also posted significant volume decreases, while automotive and intermodal saw some growth.

Overall, Union Pacific reported second-quarter net income of $1.2 billion or $1.38 per share, compared with $1.29 billion or $1.43 per share last year. On average, twenty-five analysts polled by Thomson Reuters expected earnings of $1.35 per share for the quarter. Analysts' estimates typically exclude special items.

Operating revenues for the second quarter fell 10 percent to $5.43 billion from $6.02 billion a year ago. Analysts expected revenues of $5.60 billion for the quarter.

The company's operating ratio for the quarter was up 0.6 points from a year ago at 64.1 percent.

Its core pricing rose 4 percent in the quarter, and benefited from a 41 percent drop in fuel expense.

Union Pacific has reportedly furloughed about 1,200 workers and reduced the number of people it is training.

Earlier this week, small rival Canadian National Railway Co (CNI, CNR.TO) reported a better-than-expected increase in quarterly net income, partly on an increase in revenues.

UNP is trading at $92.95, down $4.73 or 4.84%, on a volume of 6.3 million shares on the NYSE.