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Union Pacific misses profit expectations amid trade war, to cut spending, jobs

(Reuters) – Railroad operator Union Pacific Corp (UNP.N) on Thursday reported quarterly profit that missed analysts’ estimates and said it would cut capital spending and jobs as the multi-front U.S. trade war worsens an industry-wide freight volume slump.

The plans to trim costs, along with efficiency and profitability gains, helped send shares up 1.4% to $165.64 in late morning trading.

Executives from the Omaha, Nebraska-based railroad forecast an 8% drop in fourth-quarter volume. That would be a repeat of the third quarter, when coal and trade-sensitive international shipments contributed to declines.

Railroads have lost some business to competitively priced long-haul truckers as they grapple with evaporating coal demand, softness in the domestic auto and industrial sectors and U.S. trade policies that have hampered shipments of everything from soybeans to shoes.

In response to the weak environment, Union Pacific is cutting its annual capital spending budget to $3.1 billion from $3.2 billion and will continue to shrink its workforce, executives said on a conference call with analysts.

Union Pacific’s third-quarter net income fell to $1.56 billion from $1.59 billion a year earlier.

Earnings per share were $2.22 per share in the latest quarter, 8 cents short of analysts’ average estimate, according to according to IBES data from Refinitiv.

Total revenue fell to 7% $5.52 billion, below the $5.63 billion analysts expected.

Meanwhile, efficiency and profitability improved. Union Pacific’s operating ratio, a measure of operating expenses as a percentage of revenue and a key metric for Wall Street, was 59.5% versus 61.7% a year ago.

Union Pacific and Berkshire Hathaway-owned BNSF are the largest U.S. freight rail operators with annual revenue of more than $20 billion each.

CSX Corp (CSX.O), the third-largest U.S. railroad, reported better-than-expected profit on Wednesday.

Reporting by Dominic Roshan K.L. in Bengaluru and Lisa Baertlein in Los Angeles; Editing by Shailesh Kuber and Bernadette Baum