Rail giant
Union Pacific
posted third-quarter numbers that beat Wall Street estimates. That’s good for the company. The message for the overall economy isn’t as positive.
Union (ticker: UNP) reported earnings per share of $2.51 from sales of $5.9 billion on Thursday. Wall Street was looking for $2.41 a share and just under $6 billion in sales. A year ago, Union Pacific reported third-quarter earnings per share of $3.19 from sales of $6.6 billion.
It’s a quarterly earnings beat, but sales and earnings are down year over year because pricing and volumes have been down. Bulk shipments of things such as fertilizer and grain fell 4% year over year while average revenue per carload dropped 6%. Industrial carloads (think chemicals and metals) were flat while revenue per carload was down 6%. Shipments of vehicles and other retail goods fell 4% with average revenue per carload off 9%.
The volume outlook for the fourth quarter is mixed, implying essentially no volume growth amid an industrial economy that isn’t growing.
Despite falling sales, Union was able to raise pricing amid higher inflation. Some of the revenue declines reflect lower fuel prices, which are passed through to customers. Still, the overall picture is one of a relatively weak economy.
“We faced many challenges in the quarter, including continued inflationary pressures and a drop in carloads,” said CEO Jim Vena in a news release. “Operating and safety metrics are showing solid improvement, as we increase asset utilization.”
It isn’t great news for the broader economy. Following logistics is like conducting a blood test on the economy. The patient isn’t feeling well. In this environment, Union Pacific is focused on managing costs and gaining efficiencies where it can.
That is good enough for investors. Union stock was up 3.2% in premarket trading while
S&P 500
and
Dow Jones Industrial Average
futures were both down about 0.1%.
Shares have had a tough run lately. Coming into Thursday trading, Union stock is up about 3% over the past 12 months, trailing the S&P 500 by about 14 percentage points.
Management will host a conference call to discuss results at 8:45 a.m. Eastern time. Analysts and investors will want more details about the outlook for Union Pacific and the U.S. economy.
Write to Al Root at [email protected]
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