Union Pacific (NYSE: UNP)’s fourth-quarter net profit dipped 10% amid a drop in operating revenue.

Net income for the fourth quarter of 2019 totaled $1.44 billion, or $2.02/diluted share, compared with $1.55 billion, or $2.12/diluted share. Operating revenue in the fourth quarter was $5.2 billion, a 9% drop from the same period in 2018. 

Source: Union Pacific

Fourth-quarter operating revenue slipped amid fewer shipments of agricultural, premium (including intermodal) and energy products, although industrial volumes were flat, Union Pacific (UP) said Thursday. Freight revenue dipped 10% to $4.89 billion amid lower volumes and a decreased fuel surcharge revenue.

Although revenue was down, operating expenses also fell in the fourth quarter. Operating expenses totaled $3.11 billion, a 12% decline from the fourth quarter of 2018.

Source: Union Pacific

The dip in operating expenses contributed to UP reaching an operating ratio of less than 60% in the third consecutive quarter. Fourth-quarter operating ratio was 59.7%, compared with 61.6% in the fourth quarter of 2018. Operating ratio — a measure of a company’s financial health — can be calculated by dividing operating expenses by revenue.

Service metrics also improved in the fourth quarter, with freight car velocity up 5% to 220 daily miles/car, train speed up 1% to 26.2 miles per hour and terminal dwell down 13% to 23.3 hours. Terminal dwell is the amount of time a train stays at a terminal. 

Source: Union Pacific

Rail

2019 Value

2018 Value

Y/Y Gross Change

Y/Y % Change

Freight revenue (in millions)

$4,851.0

$5,387.0

($536.0)

-9.9%

Carloads (000s)

1,993

2,242

-249

-11.1%

Revenue per carload

$2,435

$2,403

$32

1.3%

Gross ton miles (in millions)

200,801.0

230,537.0

-29,736

-12.9%

Revenue per ton mile (in millions)

$99,932

$115,608

-$15,676

-13.6%

Employee counts

34563

41696

-7,133

-17.1%

Train velocity (mph)

26.2

26

0

0.8%

Dwell time (hours)

23.3

26.9

-4

-13.4%

OR%

59.7%

61.6%

-1.9%

-3.1%

EPS

$2.02

$2.12

-$0.10

-4.7%