Quiver Quantitative - Union Pacific (NYSE:UNP), the bellwether freight railroad company based in Omaha, Neb., reported a 19% decline in third-quarter profits, totaling $1.5 billion. Despite this drop, it surpassed analysts' predictions. The decline was primarily attributed to reduced freight rail volumes and revenue in crucial industrial commodities, including coal, metals, and chemicals. Significantly, forest product carloads, reflective of the slumping U.S. housing market due to surging mortgage rates, saw a 13% decrease.
CEO Jim Vena remarked on the multiple challenges they faced in the quarter, notably persistent inflationary pressures and the notable drop in carloads. Alongside the decline in industrial commodities, Union Pacific also registered a deterioration in its intermodal operations. This segment, tasked with hauling sea containers and truck trailers, experienced a 6% volume drop compared to the same period the previous year. Compounding the issue, the average revenue per car, indicative of pricing strength, plunged by 13%.
The broader freight industry has been undergoing notable shifts. For instance, J.B. Hunt (JBHT), a significant intermodal operations client, also reported diminished intermodal revenue and average revenue per load. Similarly, freight railroad CSX (NASDAQ:CSX), based in Jacksonville, Fla., recorded a profit drop in its third quarter due to lowered volumes, further highlighting the industry's challenges.
Despite these financial headwinds, Union Pacific shares saw a 2.14% uptick, closing at $210.33 on Thursday. This resilience in share price amid challenges reflects the dynamic and complex nature of the freight rail sector and its associated industries.
This article was originally published on Quiver Quantitative