UP profit up 13% but railroad predicts slower volume growth

OMAHA, Neb. (AP) — Union Pacific delivered 13% more profit in the third quarter, but the railroad predicted Thursday that its customers will ship fewer items than it expected, suggesting that the economy may be slowing down.

The Omaha, Nebraska-based railroad said it now expects the number of shipments it handles to be up about 3% this year and match the third-quarter number. Previously, Union Pacific had predicted that volume would be up 4% to 5% this year.

Shares of the company slipped about 3.2% in premarket trading.

Union Pacific reported $1.9 billion profit, or $3.05 per share, in the quarter. That’s up from $1.67 billion, or $2.57 per share, a year ago, but this year’s results were weighed down because the new contracts the railroads agreed to with their 12 unions cost $114 million more than Union Pacific had been planning on. Without that one-time charge for the new contracts, which only half of the unions have approved, Union Pacific would have reported earnings per share of $3.19.

The results exceeded Wall Street expectations. The average estimate of seven analysts surveyed by Zacks Investment Research was for earnings of $3.06 per share.

The railroad said its revenue grew 18% to $6.57 billion because fuel surcharges and the rates it charges customers were up. That also topped the Street’s forecast. Five analysts surveyed by Zacks expected $6.44 billion.

CEO Lance Fritz said the railroad continued to reduce the delays that shippers have been complaining about this year, but Union Pacific’s performance still lagged behind last year. The railroad said two key performance measures, freight car velocity and locomotive productivity, were both down about 2% from last year.

But the railroad has continued to hire more workers to help improve service. Union Pacific said that so far this year 890 new conductors have started working on the railroad, and another 518 are in training now.

Union Pacific is one of the nation’s largest railroads with a network of 32,400 miles (52,000 kilometers) of track in 23 Western states.