Union Pacific Corp (UNP.N) posted a slightly better-than-expected 15 percent rise in profit, helped by higher prices and growing shipments of chemicals and autos.
But the largest publicly traded U.S. railroad, which like its peers is facing a slump in coal shipments, sounded a note of caution on the fourth quarter on Thursday, saying the uncertain economic environment could hit demand for its hauling services.
"We had a relatively good fourth quarter last year and we do have some fundamental things in our business right now that represent some real challenges for us," said Chief Executive Jack Koraleski. His biggest concern was that the risk of sharp year-end federal spending cuts could dent consumer confidence and hurt sales of cars.
But the Omaha, Nebraska-based company, which does not provide specific earnings forecasts, stood by its plan for "record" results in 2012 and its shares rose 2.4 percent to $126.66.
Analysts expect roughly 12 percent growth in fourth-quarter earnings per share, according to Thomson Reuters I/B/E/S.
The cautious note was in line with other transport companies, ranging from CSX Corp CSX.N to FedEx Corp (FDX.N).
"It's a tone very consistent with what we've heard from transports generally," said Benjamin Hartford, an analyst at Robert W. Baird & Co. "Freight trends are still soft."
The company said on Thursday third-quarter profit was $1.04 billion, or $2.19 per share, compared with $904 million, or $1.85 per share, a year earlier.
Earnings were a penny per share higher than analysts' average forecast of $2.18 a share.
Revenue rose 4.7 percent to $5.34 billion, from $5.1 billion a year earlier. Wall Street had anticipated $5.38 billion.
COLD WINTER ADVANTAGE
Union Pacific company reported a 12 percent drop in coal volumes, reflecting a long slump in shipments that has affected U.S. railroads since the mild winter of 2011-2012.
Smaller railroad CSX on Tuesday reported a 2 percent decline in third-quarter profit as coal shipments fell 16 percent. Coal volume has been off since the previous mild winter and CSX officials said they expect that weakness to continue into next year, by which time utilities will have burned off their inventories.
That has Koraleski hoping for a cold winter, which would stimulate demand for coal at big utilities.
"A nice cold winter would be a good thing for us," Koraleski said.
As of Wednesday's close, Union Pacific shares were up about 38 percent over the past year, sharply outpacing the 13 percent rise of the Dow Jones transportation average .DJT.
(Editing by Gerald E. McCormick, Maureen Bavdek and Kenneth Barry)