Union Pacific Railroad Reports Q3 Earnings Miss

(Reuters) – U.S. railroad operator Union Pacific (NYSE:UNP) missed Wall Street estimates for quarterly revenue and profit on Thursday. This shortfall was attributed to an unfavorable business mix and reduced fuel surcharge revenue, which offset gains from higher shipments and price hikes.

Shares of the Omaha-Nebraska based company fell by over 3% before the market open.

The company continues to face challenges due to declining demand for domestic coal, as cheaper stockpiles of natural gas are preferred for energy. Consequently, freight revenue in the coal and renewables segment dropped by 17% this quarter.

On a positive note, revenues from the grain and intermodal segments increased, driven by a strong harvest season and higher imports from the west coast.

Severe weather events during the reported quarter also disrupted service, requiring shipment halts on certain rail lines. However, Union Pacific managed to enhance freight car velocity and reported a reduction in average dwell time.

The company announced a profit per share of $2.75 for the third quarter ending September 30, up from $2.51 a year ago. However, it fell short of analysts' projections of $2.78 per share, according to data compiled by LSEG.

Total operating revenue reached $6.09 billion, an increase from $5.94 billion a year earlier, yet it was below the analysts’ estimates of $6.14 billion.

Union Pacific's operating ratio for the quarter stood at 60.3%, improved from 63.4% the previous year. This ratio is a closely monitored metric representing operating expenses as a percentage of revenue.

Previously, the railroad highlighted record intermodal volumes in August at the ports of Los Angeles and Long Beach as shippers redirected freight to the west coast, taking into consideration the strikes affecting U.S. east and gulf coast ports.

Looking ahead, the company anticipates its fourth-quarter results to remain consistent sequentially while improving year-over-year compared to the last year's fourth quarter.