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Union Pacific Cuts Volume Growth Forecast as Worker Shortage Weighs

Published: October 20, 2022
A Union Pacific locomotive pulling railcars is visible on tracks in Truckee, California, June 16, 2022. (Image: Gado/Getty Images)

Union Pacific Corp on Thursday cut its annual volume growth forecast despite a rise in third-quarter shipments, as the U.S. railroad operator struggles with worker shortages.

The company also lowered its forecast for 2022 operating ratio, a key profitability metric for railroads, to around 60 percent from around 58 percent, in part due to a new tentative labor deal with unions.

Shares of the railroad operator, which connects West Coast ports to key terminals such as Chicago, were down about 3 percent before the bell.

The railroad industry has come under severe criticism from shippers and the U.S. Surface Transportation Board for cutting staffing levels to the bone in pursuit of a leaner operating model, which has left it struggling to fulfil demand.

Apart from labor shortages, supply-chain snags and port congestion have also disrupted railroad operators’ shipments over the past year.

“Inflationary pressures and operational inefficiencies continued to challenge us,” Union Pacific Chief Executive Officer Lance Fritz said in a statement.

The company trimmed its forecast for full-year volume growth to about 3 percent from four to five percent, even after a 3 percent rise in the third quarter led by higher coal and renewables shipments.

Adjusted operating ratio for the quarter through September was 58.2 percent, down 190 basis points.

Quarterly net income rose 13 percent to about $1.9 billion. Excluding a $114 million charge from the tentative labor deal, the company posted a net income of $3.19 per share, ahead of Refinitiv IBES estimates of $3.06 per share.

Revenue rose 18 percent to $6.57 billion, helped by higher shipment prices.

By Reuters (Reporting by Nathan Gomes in Bengaluru; Editing by Subhranshu Sahu)