Union Pacific 2Q profit falls 19 percent as volume slows

OMAHA, Neb. – Union Pacific’s second-quarter profit fell 19 percent as the railroad hauled 11 percent less freight.

The railroad said Thursday that full-year volumes are likely to fall 6 percent to 8 percent because of the soft global economy, strong U.S. dollar and weak consumer demand.

Its shares fell more than 2 percent in morning trading.

The Omaha, Nebraska-based company reported net income of $979 million, or $1.17 per share. That’s down from $1.2 billion, or $1.38 per share, a year ago.

The 14 analysts surveyed by Zacks Investment Research predicted earnings of $1.17 per share on average.

The railroad’s revenue declined 12 percent to $4.77 billion. Five analysts surveyed by Zacks expected $4.79 billion.

Union Pacific said shipments slowed in every category except agricultural goods. Coal again led the declines with a 21 percent drop in shipments.

The railroad cut expenses 11 percent to $3.1 billion in the quarter in response to the slower volume. Union Pacific’s workforce is down 12 percent from last year, and it has stored 14 percent of its locomotives as it works to improve efficiency.

Edward Jones analyst Logan Purk said Union Pacific’s results were OK given the economic environment, but the railroad suggested things could get worse if the economy doesn’t improve.

“They seem to be the first to draw out that consumer demand is weak,” Purk said. “Given that’s a bright spot many refer to in the economy, if your consumer is starting to crack, it’s certainly not good.”

Union Pacific shares fell $2.40, or 2.6 percent, to $91.73 in morning trading. Its shares have increased 20 percent since the beginning of the year, while the Standard & Poor’s 500 index has increased slightly more than 6 percent. The stock has decreased slightly more than 4 percent in the last 12 months.

Union Pacific Corp. operates 32,400 miles of track in 23 states from the Midwest to the West and Gulf coasts.