Union Pacific (UNP) Q3 profit misses estimates

Union Pacific Corporation (NYSE: UNP) reported a 2% decline in earnings for the third quarter of 2019 due to lower volumes, decreased fuel surcharge revenue, and negative mix. The results missed analysts’ expectations.

Net income decreased by 2% to $1.56 billion while earnings per share rose by 3% to $2.22 on lower weighted average diluted shares outstanding. Operating revenue dropped by 7% to $5.52 billion as lower volumes, decreased fuel surcharge revenue, and negative mix hurt freight revenue by 7%.

Check out the infographic on Union Pacific below.

The business volume, as measured by total revenue carloads, decreased by 8%. The growth in industrial volumes was more than offset by declines in agricultural products, premiums, and energy shipments.

Looking ahead into the full year 2019, the company now expects capital expenditures of about $3.1 billion. The operating ratio is still expected to be at sub-61% in 2019 and below 60% in 2020. In the fourth quarter, volumes are anticipated to be down at level similar to Q3.

Freight revenue decreased by 7% year-over-year, as core pricing gains were offset by lower volumes. Agricultural products and industrial were down by 1%, while the premium dropped by 9% and energy fell by 20%.

Read: CSX Corp Q3 earnings review

The $2.09 per gallon average quarterly diesel fuel price in the third quarter was 12% lower than the previous year quarter. Quarterly freight car velocity was 213 daily miles per car, a 10% improvement compared to the year-ago period.

The railroads’ industry has been experiencing a decline in rail traffic, which implies a slowing economy. Union Pacific and other railroads companies have been vulnerable to more volume declines for the third quarter. Fuel costs declined by double-digits as Union Pacific consumed less fuel.

In rivals, Kansas City Southern (NYSE: KSU) is scheduled to report its earnings results for the third quarter of 2019 on Friday before the market opens. Analysts expect Kansas City Southern’s earnings to jump by 14% to $1.79 per share and revenue will rise by 5.10% to $734.9 million for the third quarter.

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