Union Pacific 4Q profit falls 22 pct as freight volume slows

OMAHA, Neb. – Union Pacific Corp.’s fourth-quarter profit fell 22 per cent as the railroad hauled 9 per cent less freight, and officials predicted difficult conditions would persist this year.

Its shares were down almost 3 per cent in afternoon trading Thursday.

The Omaha, Nebraska-based railroad said its net income fell to $1.1 billion, or $1.31 per share, in the quarter. That’s down from last year’s $1.4 billion, or $1.61 per share.

The 12 analysts surveyed by Zacks Investment Research expected earnings of $1.42 per share on average.

Union Pacific said its revenue fell 15 per cent to $5.2 billion in the quarter. That’s also below the $5.54 billion analysts expected.

The railroad reduced its costs 13 per cent to $3.29 billion, but it wasn’t enough to offset the reduced revenue. Union Pacific finished the year with about 44,490 workers, down 7 per cent from the previous year.

Union Pacific Chairman and CEO Lance Fritz said he doesn’t think the economy is nearing a recession, but shipping volume has fallen dramatically, especially in energy products and exports.

Fritz said he expects the economic uncertainty and strong U.S. dollar will continue to affect the railroad’s business this year. Union Pacific expects total volume will be down slightly in 2016.

Coal, which was down 22 per cent in the fourth quarter, will continue to be challenged by low natural gas prices and inventory levels at utilities, Fritz said.

Crude oil shipments, and deliveries of sand and pipe related to hydraulic fracturing mining will remain depressed as long as oil prices stay in the cellar. And exports, like grain, will be hurt by the strong dollar.

“In the first quarter, it looks like a difficult quarter,” he said.

Union Pacific plans to invest $3.75 billion in capital projects and equipment this year, down from the $4.3 billion it spent in 2015.

Edward Jones analyst Logan Purk said the quarterly results fell well short of expectations, and investors should expect railroad struggles to continue this year.

“I think we’ll probably see more of this for a couple quarters as Union Pacific tries to align resources with demand,” Purk said.

The railroad’s stock fell $2.06, or 2.8 per cent, to $71.55 in afternoon trading Thursday. The stock has dropped 37 per cent in the last 12 months.

Union Pacific 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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