OMAHA, Neb. – Union Pacific’s fourth-quarter profit chugged ahead 7 per cent because the railroad raised shipping rates and collected more fuel surcharges.
But while earnings at the nation’s largest railroad exceeded Wall Street estimates, revenue fell short, and the company’s stock price eased 97 cents to $134.38 a share in late morning trading.
Union Pacific said Thursday it earned $1.04 billion, or $2.19 per share, during the quarter. Revenue grew 3 per cent to $5.25 billion. Analysts surveyed by FactSet expected UP to earn $2.15 per share on revenue of $5.30 billion.
Union Pacific’s results offer insight into the nation’s economic health because of the variety of cars, crops, chemicals and containers of imported goods it carries. It has more than 32,400 miles of track in 23 states in the West, Midwest and Gulf coast.
One cause for concern was shipping volumes, which fell 2 per cent in the quarter. Declines in coal and agricultural shipments couldn’t be overcome in other areas of the railroad’s business, despite significant increases in chemical and automotive shipments.
Coal demand has been weak in the past year because of relatively cheap natural gas prices and last year’s mild winter. In the fourth quarter, Union Pacific hauled 17 per cent less coal than the year before. Agricultural shipments were hurt by a drought and the temporary shutdown of some ethanol plants.
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“Our diverse portfolio of business, solid core pricing gains, and efficient network operations drove these results despite significantly weaker coal and grain markets,” UP CEO Jack Koraleski said.
Most of the challenges the Omaha, Neb.-based company faced last year will continue in 2013, Koraleski said.
On top of weak coal demand, Union Pacific lost one of its long-term contracts to a competitor last year, so that will further limit coal volumes.
Another commodity could offset that loss, however. Eric Butler, Union Pacific’s vice-president of marketing, said shipments of crude oil are expected to continue growing in 2013, which will be a bright spot for the railroad.
“Crude oil will be one of the strongest parts of our business,” Butler said.
And if the economy continues growing this year, the railroad could see a small increase in total volume in 2013.
For all of last year, Union Pacific’s net income surged 20 per cent to $3.94 billion, or $8.27 per share, on revenue of $20.93 billion. That’s up from 2011’s $3.29 billion, or $6.72 per share, on revenue of $19.56 billion.
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Online:
Union Pacific Corp.: http://www.up.com
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