Union Pacific’s profit jumps 14%

CEO credits improving economy, spending on infrastructure

Arkansas Democrat-Gazette/BENJAMIN KRAIN --4/4/2014--
Union Pacific diesel locomotives are lined up in different stages of repair at Union Pacific Railroad's Jenks Shop heavy locomotive repair facility in North Little Rock. The locomotive overhaul and maintenance facility is among the largest in the world and complex employs more than 1,100 workers who perform heavy maintenance on a fleet of 7,000 locomotives that pull more than 2,000 trains each day throughout the western two-thirds of the United States.
Arkansas Democrat-Gazette/BENJAMIN KRAIN --4/4/2014-- Union Pacific diesel locomotives are lined up in different stages of repair at Union Pacific Railroad's Jenks Shop heavy locomotive repair facility in North Little Rock. The locomotive overhaul and maintenance facility is among the largest in the world and complex employs more than 1,100 workers who perform heavy maintenance on a fleet of 7,000 locomotives that pull more than 2,000 trains each day throughout the western two-thirds of the United States.

OMAHA, Neb. - Union Pacific Corp. railroad delivered a 14 percent higher quarterly profit as it hauled more agricultural, industrial and coal shipments despite the harsh winter.

The Omaha-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 percent to $5.64 billion.

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

“It’s nice to see the basic building blocks of the economy coming back,” Chief Executive Officer Jack Koraleski said in a telephone interview. “I call it slow economic improvement, and I love it.”

The U.S. economy is estimated to grow 2.7 percent this year, up from 1.9 percent last year, according to economists surveyed by Bloomberg. A fast rebound of the economy “always creates problems down the road,” Koraleski said.

Weather will be a factor in Union Pacific’s results as the year unfolds. 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 drive coal shipments.

This winter’s cold slowed railroad traffic nationwide, although Union Pacific appeared to handle the weather challenges better than eastern railroad CSX Corp., which reported a 14 percent 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 employs nearly 2,900 people in Arkansas, most of them at two facilities in North Little Rock, a locomotive repair and assembly shop and a rail classification yard, Koraleski said in March. The railroad had a $230 million payroll and spent $173 million in Arkansas in 2013.

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 percent to $3.78 billion.

Union Pacific said its average train speed slowed 7 percent to 24.5 mph and the average amount of time freight cars sat in rail yards grew 12 percent to 30.7 hours during the quarter. That pace is improving as winter winds die 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 percent more carloads of freight in the quarter. Agricultural shipments grew 13 percent to lead all freight categories, but industrial products improved 9 percent and coal shipments grew 7 percent.

The railroad may be adding volume at the expense of BNSF Railway Co., the railroad owned by Warren Buffett’s Berkshire Hathaway Inc., which struggled with congestion, Justin Long, an analyst with Stephens Inc., wrote in a March 31 note.

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

Its shares rose $1.44 to close Thursday at $189.59.

Information for this article was contributed by Thomas Black of Bloomberg News.

Business, Pages 25 on 04/18/2014

Upcoming Events