Union Pacific Slumps on Drop in Lucrative Auto, Coal Shipments

(Bloomberg) -- Union Pacific Corp. slumped the most in four months after declines for some of its most profitable cargoes dragged on the railroad’s profit.

Adjusted earnings for the largest publicly traded railroad in the U.S. fell to $2.01 a share for the third quarter, missing analysts’ expectations by 4 cents. Sharp drops in volume for coal and autos sent sales tumbling 11% from a year earlier, even though total carloads fell just 4%. Union Pacific’s $4.92 billion in revenue was in line with estimates compiled by Bloomberg,

Intermodal cargo climbed 9.4%. But that category, mostly consumer goods handed off to trucks for final delivery, is a lower margin business than moving coal hoppers and car transporters.

“UP was able to outperform our more cautious expectations on mix in the quarter but still fell short of consensus expectations,” Brian Ossenbeck, an analyst at JPMorgan Chase & Co., wrote in a note to clients Thursday.

Railroads were whipsawed by a historic plunge in second-quarter volume because of coronavirus lockdowns and a snap back in the third quarter as businesses began to reopen. Union Pacific’s carloads jumped 19% in the third quarter from the second, according to a statement.

The stock fell 6.3% to $186.93 at 11:45 a.m. in New York after tumbling as much as 6.8%, the biggest intraday drop since June 11. The decline was the sharpest on the Standard & Poor’s industrials index.

Union Pacific has held the line on costs, in part by keeping its workforce 18% below least year’s levels even as volume returned. Operating ratio, a measure of efficiency in which a lower number is better, improved to a record 58.7% from 59.5% a year earlier.

The company forecast volume will be down 7% for the year, better than the 10% decline projected in July.

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