Railroads have been hit by lower shipments of coal, both for domestic and export, due to low natural gas prices, high stockpiles and weak global demand. Shipments of grains and other agricultural commodities have also been weak due to drought.
"We are cautious on the economic outlook for this year," Chief Financial Officer Rob Knight said on a post-earnings conference call. "We are expecting to see many of the same challenges we faced last year."
Coal and agriculture products are expected to be the biggest challenges this year, the company said.
Union Pacific expects first-quarter coal volumes to decline in the mid-teens and agriculture volumes to be down in the high single digits.
CFO Knight said he sees a potential for slightly positive volume growth in 2013 if industrial production in the United States expands the projected 2 percent, as it would help offset the weakness in coal.
The company was closely watching developments in Washington and how it impacts economic growth, he said.
CSX Corp, Union Pacific's closest publicly traded rival, said a return to volume growth was dependent on how soon Washington agreed on a long-tem fiscal plan as the uncertainty was affecting business and consumer confidence.
Omaha, Nebraska-based Union Pacific's shipment volumes fell 2 percent in the fourth quarter.
Volume declines in coal and agricultural products more than offset growth in chemicals, automotive and intermodal shipments, the company said.
Net income rose to $1.04 billion, or $2.19 per share, in the fourth quarter, from $964 million, or $1.99 per share, a year earlier.
Operating revenue rose 3 percent to $5.25 billion.
Analysts expected earnings of $2.16 per share on revenue of $5.31 billion, according to Thomson Reuters I/B/E/S. (Reuters)