Union Pacific Earnings Fall Short of Expectations Despite Strong Revenue

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Union Pacific Earnings Fall Short of Expectations Despite Strong Revenue

Union Pacific Corporation (NYSE:UNP) on Thursday reported quarterly earnings that fell short of expectations, despite implementing price increases. Following the announcement, the company's shares dropped over 3% in early trading. The Omaha, Nebraska-based railroad operator said the positive impacts of increased shipments and price hikes were offset by poor business mix and a decline in fuel surcharge revenue.

The company continues to grapple with reduced domestic coal demand as energy producers shift to abundant and affordable natural gas, leading to a 17% decrease in freight revenue for the coal and renewable energy segment during the quarter. However, Union Pacific experienced revenue growth in its grain and intermodal segments, driven by a strong harvest season and a rise in West Coast imports.

Severe weather events during the quarter caused operational challenges, leading to service disruptions and mandatory outages on certain rail lines. Despite these difficulties, the company reported improvements in car velocity and a reduction in average dwell time for its rail cars.

Union Pacific's earnings per share rose to $2.75 in the third quarter ended September 30, up from $2.51 in the same period last year. However, this figure fell short of the analyst estimates of $2.78 compiled by LSEG. The company's total operating revenue increased to $6.09 billion from $5.94 billion a year earlier, missing the expected $6.14 billion.

The company reported an improvement in the operating ratio, a crucial metric indicating the efficiency of expenses relative to revenue, which stood at 60.3% for the quarter, better than the 63.4% reported in the previous year.

In August, Union Pacific reached record intermodal volumes at the ports of Los Angeles and Long Beach, as shippers redirected cargo to the West Coast amid potential strikes at ports along the U.S. East and Gulf coasts.

Moving forward, Union Pacific anticipates sequential fourth-quarter results to be consistent with the third quarter, while projecting improvements compared to the fourth quarter of last year.