LOS ANGELES (Reuters) - Union Pacific Corp UNP.N on Thursday reported a bigger-than- expected drop in quarterly profit, after demand for e-commerce and beer shipments failed to offset weakness in coal and petroleum carloads, and shares fell 6%.
Volume rebounded toward the end of the third quarter, as U.S. businesses restocked inventories depleted during the pandemic. The nation’s largest publicly held railroad expects that lift to continue in the coming months and forecast a 4% rise in fourth-quarter volume.
“We probably (will) remain pretty strong through the remainder of this year. As you go into the first quarter next year, that’s when the question marks will really start,” Union Pacific Chief Executive Lance Fritz said, referring to concerns that the volume resurgence could wane.
The Omaha, Nebraska-based company’s third-quarter net income declined 12% year-over-year to $1.4 billion, or $2.01 per share.
Total operating revenue fell 11% to $4.9 billion.
Analysts, on average, expected earnings of $2.06 per share and revenue of $4.96 billion, according to IBES data from Refinitiv.
Shares shed 5.7% to $188.13 in afternoon trading.
Inbound cargo began surging in August at the Port of Los Angeles, the busiest seaport in the United States and a key hub for Union Pacific, which serves the western half of the country.
Executives said that spike created some disruption as the railroad adapted to the swift uptick in demand.
CSX Corp CSX.O, considered one of the most efficient U.S. railroads, reported better than expected results on Wednesday.
That report came a day after Union Pacific said Chief Operating Officer Jim Vena, a turnaround expert who streamlined the company’s operations, would step down at year end.
Vena, a former Canadian National Railway Co CNR.TO executive, joined the company in January 2019 under a deal with a two-year incentive package. Vena will advise CEO Fritz until June of 2021.
Reporting by Lisa Baertlein in Los Angeles; editing by Chizu Nomiyama and Steve Orlofsky
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