Union Pacific ( UNP) posted a sharp drop in fourth-quarter earnings and said 2005 is off to "a difficult start."

For its fourth quarter ended Dec. 31, the Omaha, Neb., railroad giant earned $79 million, or 30 cents a share. That's down from the year-ago continuing operations profit of $333 million, or $1.28 a share.

Excluding a charge tied to so-called unasserted asbestos claims, latest-quarter earnings were 88 cents a share, which is 4 cents ahead of the Thomson First Call analyst consensus estimate. Revenue rose 8% from a year ago to $3.21 billion, also ahead of the Wall Street estimate.

Commodity revenue rose 8% from a year ago in the fourth quarter, while business volume ticked up 1%. The company said its operating margin plunged to 6.3% from 19.9% a year ago, though the asbestos costs accounted for 7.7 points of the decline. Systemwide speed dropped 1.3 mph sequentially and 2.2 mph year over year.

"High fuel prices and increased operating costs continued to impact earnings," CEO Dick Davidson said. "However, we continue to be encouraged by the unprecedented demand we have experienced over the past year."

The company didn't offer 2005 guidance, but indicated January's wicked weather has presented a challenge. "The year is off to a difficult start with the recent severe storm in California and Nevada, but we continue to believe that 2005 will be a better year for our company," Davidson said. "As we put the weather challenges behind us, and our new network initiatives gain momentum, we expect to see improvements in both our service to customers and returns to our shareholders."

On Monday, Union Pacific fell 50 cents to $59.51.

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