(The following story by Joe Ruff appeared on the Omaha World-Herald website on May 1.)
OMAHA, Neb. — Union Pacific ships coal, automobiles, grain, frozen foods, lumber, chemicals, tennis shoes, televisions and toys, a broad range of goods that is helping it weather the current economic downturn, Chairman and Chief Executive Jim Young told shareholders today.
“In fact, as we look at 2008, we believe two of our six business groups, autos and industrial products, are going to have a pretty tough year,” Jim Young said at the company’s annual meeting in Salt Lake City. “Two others, chemicals and intermodal, should be ‘OK.’ And, our last two groups, agriculture and energy, will likely have record performances.”
Overall, volume on the nation’s largest railroad this year will be about even with 2007, give or take about 1 percent, but earnings should grow 12 percent to 19 percent based on better pricing and improved efficiency, Union Pacific officials have said.
The company is forecasting earnings per share in 2008 at $7.75 to $8.25.
Last year, Omaha-based Union Pacific saw a 16 percent increase in profits to $1.85 billion or $6.91 a share, on a 5 percent increase in revenue to $16.28 billion.
In its first quarter ended March 31, Union Pacific credited higher prices for its service and better recovery of its diesel fuel costs for a 15 percent increase in net income despite flat volume.
Young also told shareholders that Union Pacific has improved its customer service over the last year, setting “best ever” marks in several areas.
At the meeting, shareholders were asked to approve increasing the number of shares Union Pacific can issue from 500 million to 800 million to give it flexibility to split its stock, raise money, make acquisitions or fund investments.
As of late February, Union Pacific had 276.4 million shares outstanding.
Union Pacific’s stock has traded near or higher than $100 a share over the last year. It closed Wednesday at $145.19.
Union Pacific has delivered an 85 percent increase in total shareholder return over the last 21⁄2 years, outpacing the S&P 500 and the Dow transportation indexes, Young said.
“If you invested $100 in U.P. stock in January 2006, that investment would be worth $185 today,” Young said.
The company increased its dividend twice last year, from $1.20 to $1.76 per share annually, a 47 percent increase. Through the end of April, it had repurchased nearly 16 million shares, returning $1.9 billion to shareholders, Young said.
Union Pacific is incorporated in Salt Lake City and holds its annual meeting there. The railroad has 32,200 miles of track stretching from the Midwest to the West and Gulf Coasts. It employs about 50,000 people.
Shareholders also were asked to approve a stockholder’s proposal they had rejected twice in years past that would require Union Pacific to more fully disclose its political donations.
Presented by New York City public worker pension funds, the proposal argued that government disclosure rules were inadequate and more “transparency” was needed.
Union Pacific’s board recommended voting against the proposal, arguing that current disclosures were adequate and that additional reports would be an unnecessary and unproductive.
The freight rail industry, including Union Pacific, has been riding a wave of demand for services that began in 2003 and has allowed companies to charge more for shipping and turn away business that does not meet their price points.
The slowing economy threatens to erode some of the gains, but Union Pacific has continued to work steadily across its 23-state region, despite struggling sectors such as housing, automobiles and consumer goods.
Demand has remained strong for agriculture products such as corn, wheat, ethanol and its byproducts — largely livestock feed — as well as coal, railroad officials said.
Union Pacific has invested heavily in recent years maintaining and upgrading its track and other facilities. It spent $3.1 billion on capital investments last year and plans to spend about the same amount in 2008.
High fuel prices affect the railroad, but Union Pacific touts the fact that rail transportation offers three times the fuel efficiency of trucks. One double-stacked intermodal train, which uses containers easily transferred from ships to trains to trucks, can take up to 280 trucks off the highway, Young said.