Union Pacific railroad chugs past weather challenges to deliver 14 per cent jump in 1Q profit


OMAHA, Neb. – The harsh winter didn’t keep Union Pacific railroad from delivering 14 per cent higher quarterly profit as it hauled more agricultural, industrial and coal shipments.

The Omaha, Neb., based railroad said Thursday that it generated $1.09 billion in net income, or $2.38 per share, in the first quarter. That’s up from $957 million, or $2.03 per share, a year ago.

Union Pacific’s revenue grew 7 per cent to $5.64 billion.

Analysts surveyed by FactSet expected Union Pacific to report earnings per share of $2.37 on $5.7 billion in revenue.

Union Pacific officials are optimistic about the year ahead. “There’s still a lot of year ahead of us, but we are seeing signs of gradual economic improvement, and we’re encouraged by the opportunities it presents,” said Jack Koraleski, Union Pacific’s chairman and CEO. The number of carloads railroads carry is considered an indicator of the health of the overall economy.

Weather will be a factor in Union Pacific’s results. Agriculture shipments vary based on the size of the harvest. Utilities burn more coal during a hot summer to satisfy electricity demand for air conditioning. Higher demand for coal would boost coal shipments.

This winter’s cold slowed railroad traffic nationwide, although Union Pacific appeared to handle the weather challenges better than eastern railroad CSX, which reported a 14 per cent drop in quarterly profit earlier this week.

Koraleski said the results reflect the investments Union Pacific has made in its network, but the railroad was also fortunate that the worst of storms struck elsewhere.

“I think the investment in our infrastructure and the condition of our infrastructure paid huge dividends for us, and maybe we had a little luck as well,” Koraleski said.

Union Pacific added 550 employees and 600 locomotives during the first quarter because the cold temperatures forced it to use shorter trains and shift some switching operations to different locations. That contributed to expenses growing 3 per cent to $3.78 billion.

Union Pacific said its average train speed slowed 7 per cent to 24.5 mph and the average amount of time freight cars sat in rail yards grew 12 per cent to 30.7 hours during the quarter. That pace is improving as winter winds down and the backlog is reduced.

Edward Jones analyst Logan Purk said Union Pacific’s results were impressive given the severe weather.

“It speaks to their ability to run an efficient railroad,” Purk said.

Union Pacific hauled 5 per cent more carloads of freight in the quarter. Agricultural shipments grew 13 per cent to lead all freight categories but industrial products improved 9 per cent and coal shipments grew 7 per cent.

Coal demand has been weak for several years as some utilities switched from coal to natural gas to take advantage of relatively low natural gas prices.

Union Pacific Corp. operates 32,400 miles of track in 23 states from the Midwest to the West and Gulf coasts.

Its stock slipped 47 cents to $187.68 in midday trading Thursday.


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Union Pacific Corp.: www.up.com

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