Image source: Union Pacific.

Union Pacific's (NYSE:UNP) fourth-quarter profit plunged 22% as a sharply lower energy prices and slumping industrial production continue to take a toll on the railroad's results.

"Total volumes decreased 9 percent in the quarter, more than offsetting another quarter of solid core pricing gains," said CEO Lance Fritz in a press release Thursday.

With the exception of the automotive segment, which rose 1%, Union Pacific's freight revenue was down across the board, including coal (31%), industrial (23%), intermodal (14%), agricultural (12%), and chemical (7%). All told, operating revenue fell 15% year over year to $5.2 billion.

To mitigate the effects of failing demand, Union Pacific reduced costs by furloughing workers and placing locomotives into storage. Those efforts -- along with a 39% year-over-year decline in the average price of diesel fuel in Q4 -- helped Union Pacific achieve an operating ratio (a key metric defined as operating expenses divided by operating revenues) of 63.2%. Yet while respectable, that figure was 1.8 percentage points worse than the fourth quarter of 2014, as revenue fell faster than the railroad operator could cut costs.

All told, operating income fell 19% to $1.9 billion. Net income, due in part to higher interest expense, declined 22% to $1.1 billion. And earnings per share, helped somewhat by the $586 million in share repurchases Union Pacific conducted during the quarter, fell a slightly less 19% to $1.31.

"This past year was a difficult one in many respects, but our team did outstanding work in the face of dramatic declines in volumes, and shifts in our business mix," Fritz said.

Looking ahead
Management issued a somber outlook for 2016, but also expressed some optimism that as conditions eventually improve, so too will the company's fortunes.

"Overall economic conditions, uncertainty in the energy markets, commodity prices, and the strength of the U.S. dollar will continue to have a major impact on our business this year," said Fritz. "However, we are well-positioned to efficiently serve customers in existing markets as they rebound."

The long-term shift away from coal and toward cheaper and cleaner natural gas is a long-term trend that will likely weigh on Union Pacific's results for the foreseeable future. Yet the vicious decline in oil prices was largely unexpected, and has led to sharply lower shipments of crude oil and hydraulic fracturing related products. In addition, the relentless strengthening of the U.S. dollar is denting shipments of U.S. exports. Combined, these developments have been a perfect storm of violent headwinds for Union Pacific and the railroad industry as a whole.

Yet outside of the secular decline in U.S coal demand, these other trends are likely to stabilize at some point, particularly oil prices that could rebound faster than many investors currently expect. And Fritz alluded , thanks to the company's cost-cutting initiatives, Union Pacific's profits stand to recover quickly should an economic recovery take hold.