By (Reuters) -U.S. railroad operator Union Pacific (NYSE:UNP) missed Wall Street estimates for quarterly revenue and profit on Thursday, as an unfavorable business mix and reduced fuel surcharge revenue offset gains from higher shipments and price hikes.
The Omaha-Nebraska based company’s shares were down more than 3% before the bell.
The company continues to face headwinds from declining demand for domestic coal as people turn to cheap stockpiles of natural gas for energy, causing freight revenue in the coal and renewables segment to fall by 17% in the quarter.
But it benefited from higher revenues in the grain and intermodal segments, which were led by a strong harvest season and higher west coast imports.
Severe weather events throughout the reported quarter also impacted service at the railroad as it had to halt shipments on certain rail lines, despite that the company managed to provide an improvement in its freight car velocity and reported a lower average dwell time.
Union Pacific reported a profit per share of $2.75 for the third quarter ended Sept. 30, up from $2.51 a year ago, but fell short of analysts’ estimates of $2.78 per share, according to data compiled by LSEG.
Total operating revenue came in at $6.09 billion, an increase from $5.94 billion a year earlier, but was below analysts’ estimates of $6.14 billion.
The company reported an operating ratio of 60.3% for the quarter, an improvement from 63.4% a year earlier. The ratio is a keenly watched metric that indicates operating expenses as a percentage of revenue.
The railroad previously said it handled record intermodal volumes in August at the ports of Los Angeles and Long Beach as shippers shifted freight to the west coast, keeping in mind the strikes at the U.S. east and gulf coast ports.
The company expects its fourth-quarter results to stay consistent sequentially, while improving year-over-year from the year-ago fourth quarter.