Union Pacific Corp. (NYSE:UNP) announced during its earnings call that its second-quarter profit fell, but remained in line with Wall Street’s expectations. The company reported net income of $979 million, or $1.17 per share, down from $1.2 billion, or $1.38 per share, a year ago. Analysts polled by Zacks Investment Research predicted earnings of $1.17 per share on average. The railroad’s revenue declined 12 percent year-over-year to $4.77 billion, slightly lower than the $4.79 billion expected by analysts.
The railroad reported that it hauled 11 percent less freight in the quarter than in the same quarter of last year. Union Pacific said shipments slowed in every category except agricultural goods, which increased 2 percent. Coal shipments declined 21 percent. Shipments of industrial products dropped 11 percent. Automotive shipments were down 2 percent. The railroad predicts that full-year volumes are likely to fall 6 percent to 8 percent.
Intermodal freight traffic, which moves freight using a combination of trains and trucks, was down 14 percent year-over-year in the second quarter. CSX Transportation, Kansas City Southern Railway and Canadian Pacific Railway have also posted declines in their intermodal business and revenue. Overcapacity in the trucking segment and historically low diesel prices have made the railroad business more challenging in recent months. Union Pacific operates 32,400 miles of track in 23 states from the Midwest to the West and Gulf coasts.
In response to the lower volume, Union Pacific cut expenses 11 percent to $3.1 billion in the quarter. The Omaha-based railroad, which employs about 8,000 people in Nebraska, said it placed 3,300 employees on furlough. The railroad ‘s workforce has been reduced by 12 percent in the last year. Its total work force has dropped to a quarterly average of 43,053, compared with 48,992 a year earlier. About 14 percent of its locomotives are currently in storage.
Some analysts said that the results were not surprising given the current economic environment. Union Pacific’s results have been hammered by the soft global economy the strong U.S. dollar, and weak consumer demand. The railroad suggested things could get worse if the economy doesn’t improve and doesn’t expect the soft freight economy to improve until at least 2017.
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, but have decreased slightly more than 4 percent in the last 12 months.