(The New York Times posted the following Reuters story on its website on March 24.)
SEATTLE — Union Pacific Corp. lowered its first-quarter earnings outlook on Monday, blaming higher fuel prices stemming from the Iraq war, severe winter storms, and said that it would miss profit targets for 2003.
The Omaha, Nebraska-based freight hauler’s shares dropped to $54.69 in after-hours trading, after closing at $56.66.
The largest U.S. rail freight carrier said in a statement that it now expects earnings from continuing operations to be between 58 cents and 60 cents per share for the first quarter of 2003.
Union Pacific, whose rail lines are spread across the Western United States, also said that profits would dip on weaker demand.
In January, the company had said it expected a first quarter profit between 66 cents and 71 cents, compared to the 86 cents per share it earned in the first quarter of 2002.
Analysts polled by Thomson First Call had forecast, on average, a profit of 69 cents per share, for the first quarter.
The company said in a statement that the “war fears dramatically increased” fuel costs and contributed to weaker economic demand, and that this winter’s severe storms have also hurt its bottom line.
Jim Young, chief financial officer, had warned in a conference call in January that that the first-quarter shortfall would be caused by job cuts and higher fuel costs.
Union Pacific said on Monday that rising diesel fuel prices will add approximately $130 million to operating expenses and that its severance costs would total 4 cents per share.
Union Pacific also said it will report a cumulative effect of a change in accounting principle that will add about $250 million to $300 million after tax to Union Pacific’s first quarter net income.
As a result of the weaker first quarter, Union Pacific said it would miss its previously stated 2003 profit targets.
“It appears that high fuel prices and economic weakness in the first half of the year will challenge the company’s ability to reach our 2003 goal of 5 percent to 10 percent earnings growth over 2002 core earnings of $4.30 per diluted share,” Union Pacific chief executive Dick Davidson said in a statement.
“Looking ahead, I’m hopeful that a quick and positive outcome to the war in Iraq will restore consumer confidence, strengthen the economy and continue to drive fuel prices lower, thus helping to drive a strong second-half performance for the company,” Davidson said.
Union Pacific’s shares are down nearly 16 percent from their year-highs.