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Union Pacific Corp. reported a 17% drop in fourth-quarter profit Thursday, but said a decline in shipping volumes had reversed and that growth is returning as the economy improves.

Shipping volumes for the second-largest U.S. railroad by revenue fell 5% in the quarter compared to a year ago. The company saw improvement over the quarter, with volumes turning positive in December and said it sees "volume growth opportunities" in each of its markets this year.

CSX Corp., the No. 3 railroad by revenue, made a similar forecast Wednesday, saying it expects growth in shipping in all of its segments, except the moving of coal.

Union Pacific's 5% drop in shipping volume in the fourth quarter compares with a 15% drop in the third quarter. Union Pacific is averaging about 160,000 carloads a week.

"You can see some signs of improvement," Union Pacific's Chairman and Chief Executive James Young said in interviews Thursday. Still, he expressed caution on the nascent recovery. As one sign of the company's wait-and-see approach, Union Pacific has a record $1.8 billion in cash on hand, but the company is waiting to see how the recovery unfolds before deploying the money, Mr. Young said.

"My shareholders are interested in what we are going to do with that cash," he said. While the goal is to return it to shareholders, "I want to see the economy start to move the right way," he said.

Railroad shipment volumes are closely tracked because a rebound in transportation typically precedes a larger economic recovery by several months. "There's definitely more good than bad in this report and it's a lot more upbeat than some other companies," said Ed Wolfe, a transportation analyst with Wolfe Research LLC in New York.

Union Pacific posted fourth-quarter profit of $551 million, or $1.08 a share, down from $661 million, or $1.31 a share, a year earlier. Analysts polled by Thomson Reuters had most recently predicted earnings of $1.04 a share on $3.78 billion in revenue.

Union Pacific also said that it plans to spend $2.5 billion in capital improvements in 2010. But Mr. Young said the railroad could be forced to trim those plans if it's unable to pass the cost of new train safety regulations onto customers.

The Obama administration recently finalized rules requiring railroads to install safety hardware, to prevent train collisions, by the end of 2015. Union Pacific expects to spend $200 million on the technology this year, and could spend $1.4 billion over the next six years, Mr. Young said.

He also said that he has serious reservations about an unrelated Senate bill that would revamp federal oversight of the freight railroads.

Meanwhile, GATX Corp., a Chicago rail-car leasing company, reported that fourth-quarter earnings fell 26%. GATX reported a profit of $21.5 million, or 45 cents a share, down from $28.9 million, or 58 cents a share.

Burlington Northern Santa Fe Corp., the largest U.S. railroad company by revenue, reported a 13% drop in fourth-quarter profit Thursday, but said it saw improvement in volumes in the second half of 2009, and "expects this gradual improvement to continue" into 2010.

The Fort Worth, Texas-based company reported profit of $536 million, or $1.55 a share, down from $615 million, or $1.78 a share, a year ago. The company said shipping loads dropped by 12% over a year ago.