OMAHA, Neb. — Union Pacific Corp. said Thursday its fourth-quarter profit fell 17 percent as the railroad’s efforts to improve productivity and limit costs could not offset lower shipping volume.
The Omaha-based company handled 5 percent fewer carloads during the quarter as the weak economy continued to limit demand.
Union Pacific generated $551 million in quarterly net income, or $1.08 per share. That’s down from $661 million, or $1.31 per share, a year ago.
Revenue fell 12 percent to $3.75 billion from $4.29 billion.
Analysts surveyed by Thomson Reuters expected Union Pacific to report quarterly earnings per share of $1.04 on $3.78 billion revenue.
“Union Pacific’s fourth quarter earnings reflected the continued impact of the recession that began in 2008,” Chairman and CEO Jim Young said.
Young said the economic picture for 2010 looks somewhat more favorable than last year, but the railroad did not provide specific earnings guidance. A year ago, the railroad did not provide specific earnings guidance for 2009, saying the economy made it too difficult to predict demand.
Union Pacific and the other major freight railroads are considered gauges of the nation’s economic health because the volume of cars, chemicals, crops, lumber and containers of imported goods they carry hints at the health of those industries.
Union Pacific said freight revenue again fell across all six of its main business segments even though volume improved slightly in its intermodal, agricultural and automotive sectors.
The biggest revenue drops came in UP’s energy and industrial products segments. Energy revenue slid 22 percent to $765 million. Coal shipments fell as the weak economy generated less demand for electricity. Industrial products revenue fell 28 percent to $513 million with soft demand for lumber, metals, construction products and other raw materials.
Young said all of Union Pacific’s business segments have the potential to grow because the railroad is operating significantly below capacity and delivering about 160,000 carloads a week. At its peak a couple years ago, Union Pacific was handling more than 200,000 carloads a week.
“We still have a lot of room to go to get back to where we were,” Young said.
Union Pacific officials say coal demand may improve later this year with a warm summer and a rebound in industrial production.
Union Pacific’s fuel costs fell 26 percent to $541 million, as the average price per gallon of diesel dropped to $2.05 from last year’s $2.46.
The railroad’s average train speed across its 23-state network improved 8 percent to an average of 27.0 mph. That’s one measure of productivity gains Union Pacific achieved during the quarter while operating 32,400 miles of track from the Midwest to the West and Gulf coasts.
Union Pacific’s compensation costs fell 8 percent, and the railroad’s payroll was down 10 percent to 42,157 in the quarter
Union Pacific said it has 4,200 employees furloughed, and 44,000 railcars and 1,600 locomotives stored. The figures indicate UP has pulled some cars and locomotives out of storage since the third quarter, but few furloughed workers have been recalled.
Young said he expects those workers and equipment to go back to work eventually, but the timing will depend on the economy.
“There’s no question they’ll come back,” Young said. “It’s just a question of when.”
For all of 2009, Union Pacific reported net income of $1.9 billion, or $3.75 per share on $14.1 billion revenue. That’s down 19 percent from $2.4 billion net income, or $4.54 per share, on $18 billion revenue in 2008.
Kevin Jones of The Trucker staff can be reached for comment at firstname.lastname@example.org.