Union Pacific misses quarterly estimates on weak auto shipments

Union Pacific missed Wall Street estimates for first-quarter profit and revenue on Thursday, hurt by weak automotive shipments and lower fuel surcharge, sending its shares down 3%.

The Omaha, Nebraska-based company said its volumes were pressured by economic uncertainty and weaker coal demand.

Union Pacific has struggled with lower demand for coal shipments as customers turn to cheaper stockpiles of natural gas for energy.

That trend, however, is expected to change after U.S. President Donald Trump signed executive orders last month aiming to boost coal production.

Trump's wave of tariffs has also impacted a host of manufacturers, most notably the automotive sector, with carmakers rethinking their production plans.

On a post-earnings call with analysts, Union Pacific executives flagged that they were also challenged by lower auto parts shipments. Its quarterly automotive shipment revenue fell 5%.

Union Pacific added that it was expecting a slowdown in international intermodal in the current quarter and lower volumes in the second half of the year.

"We believe Union Pacific is continuing the process implementing and improving upon Precision Scheduled Railroading (PSR) principles," said Jeff Windau, senior industrials analyst at Edward Jones.

"We feel this will improve the company's operating performance and allow for the reduction in expenses."

The company also joined its East Coast peer, Norfolk Southern, in reaffirming its annual target.

Union Pacific said its operating ratio, a key profitability metric, came at 60.7%, flat compared with a year ago.

Quarterly revenue from its intermodal shipment, which involves transporting goods via two or more means of transportation, rose 10% to $1.19 billion.

On an adjusted basis, Union Pacific earned $2.70 per share in the first quarter, compared with the average analyst estimate of $2.75, according to data compiled by LSEG.

Revenue for the quarter ended March 31 marginally fell to $6.03 billion, compared with estimates of $6.08 billion.