Union Pacific’s net profit for the third quarter of 2023 slipped 19% amid a 10% drop in overall revenues, the Western U.S. Class I railroad said Thursday morning.
Third-quarter 2023 net income was $1.53 billion, or $2.51 per diluted share, compared with nearly $1.9 billion, or $3.05 per diluted share, for the third quarter of 2022.
“We faced many challenges in the quarter, including continued inflationary pressures and a drop in carloads,” UP CEO Jim Vena said in Thursday’s earnings release. “Operationally we gained momentum through the quarter, which positions us to provide our customers with great service. Operating and safety metrics are showing solid improvement, as we increase asset utilization. We are aligning the team around our strategy focused on being the best in safety, service, and operational excellence as we drive growth to the railroad. Through our day-to-day actions, we will continue to make improvements as we exit the year.”
Overall operating revenue was $5.9 billion, down 10% year-over-year (y/y). Of that, freight revenue totaled $5.5 billion, which is a 9% decrease compared with the same period in 2022.
UP (NYSE: UNP) said revenue was lower amid reduced fuel surcharge revenue, lower volumes and business mix, but those were partially offset by core pricing gains. Total revenue carloads slipped 3% y/y.
However, UP reduced operating expenses by 4% in the third quarter to $3.76 billion amid a 25% decrease in fuel expenses and a 6% decrease in compensation and benefits.
Operating income was $2.18 billion in the third quarter, down 17% y/y. Operating ratio, a metric that investors sometimes use to gauge the financial health of a company, rose from 59.9% to 63.4% A lower OR can imply improved financial health.
Average train length grew 1% to 9,537 feet, while quarterly freight car velocity was 200 daily miles per car, which is “a 5% improvement,” UP said.
UP said its full-year outlook for 2023 “remains relatively unchanged,” with “year-to-date softness in consumer-related volumes likely [to] drive full year volume expectations below industrial production.”
Vena said in UP’s Inside Track newsletter, published Thursday, “Team UP, we are making progress to be the best at Safety, Service and Operational Excellence. We closed the third quarter with clearly identified areas we have to improve. We are working to improve safety. We are also moving faster, being more efficient, productive and responsive to our customers and all stakeholders. September alone had some of the best service performance metrics we’ve seen in a while.”
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