UNP Union Pacific Corp

By Anne Steele 

Union Pacific Corp. said its profit slid 15% in the first quarter as the railroad operator continued to face weak freight demand, especially for coal, offsetting benefits from higher prices and cost-cutting efforts.

Earnings, though, handily beat estimates, sending shares of the Omaha, Neb., company -- which have risen 18% over the past three months -- up 2.4% to $85.88 in premarket trading.

The rail industry has been under pressure from lower commodities prices that have weighed on demand for coal, a key market. The sector also is facing increased competition from trucks, as lower fuel prices make hauling containers and trailers less expensive. Companies, including Union Pacific, have mothballed locomotives and furloughed workers to curb costs.

For the three months ended March 31, Union Pacific's total freight volume skidded 14% amid declines across all its sectors more than offset growth in automotive, which rose 7%.

Coal shipments dropped 34%, and industrial products volume slumped 10%.

Freight revenue slipped 14% to $4.5 billion amid the weaker freight volume and lower fuel surcharges.

"In this challenging volume environment, we have continued our intense focus on operating safely and efficiently, managing our resources and improving our customer experience," Chief Executive Lance Fritz said. "As a result, the quarterly operating ratio came in at 65.1%, up only 0.3 points from last year, as solid core pricing and productivity improvements helped to offset an 8% decline in total volumes."

Over all, Union Pacific reported a profit of $979 million, or $1.16 a share, down from $1.15 billion, or $1.30 a share, a year earlier. Revenue decreased 14% to $4.83 billion.

Analysts polled by Thomson Reuters expected per-share profit of $1.10 on revenue of $4.9 billion.

Last week, CSX Corp. reported revenue fell in the first quarter, as the volume of coal shipments fell 31% to continue a trend that has hurt the top line for several quarters.

Write to Anne Steele at Anne.Steele@wsj.com

(END) Dow Jones Newswires

April 21, 2016 08:54 ET (12:54 GMT)

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