(The Associated Press circulated the following on January 24.)
NEW YORK — Union Pacific Corp., the largest U.S. railroad operator, reports earnings for the fourth quarter on Thursday. The following is a summary of key developments and analyst opinion related to the period.
OVERVIEW: Like its Class I competitors, Omaha., Neb.-based Union Pacific enjoyed above-average pricing power throughout 2006 and that should help the company to a modest upside in the fourth quarter. With competitors Burlington Northern Santa Fe Corp. and CSX Corp. already offering positive revenue and earnings outlooks for 2007, the industry eagerly awaits a similar forecast from Union Pacific.
With perhaps the exception of Burlington Northern, no U.S. railroad enjoys greater exposure to the rapidly growing intermodal and coal markets in the West than Union Pacific. The railroad spent billions this year on track improvements to support intermodal service, which involves transferring freight among types of transportation, such as loading shipping containers on rail cars for final delivery. As intermodal service mostly includes freight like toys, electronics and clothing from Asia, Union Pacific could reveal gains supported by the holiday shopping season.
In addition, Union Pacific will likely show quarterly volume and revenue gains in coal. Although warmer weather has kept inventories high at utilities, the railroad already indicated that it has brought record volumes of coal out of the South Powder River Basin in Wyoming this year.
Analysts expect comment on the status of its efforts to improve service by eliminating bottlenecks and double-tracking its Sunset Corridor between Southern California and Texas, as well as news on efforts to further improve rail lines into the Powder River Basin and what impact a recent ice storm in Nebraska might have on its bottom line in the first quarter of 2007.
BY THE NUMBERS: Union Pacific said in October that expects to earn between $1.50 per share and $1.60 per share. Analysts polled by Thomson Financial forecast a profit of $1.57.
ANALYST TAKE: John Larkin, an analyst at Stifel Nicolaus & Co., sees strong growth for Union Pacific in coal and grain volumes, which should offset declines in lumber and industrial freight shipments. He thinks intermodal volumes will gain 1 percent to 2 percent. “Pricing remains strong across the board, both with respect to base pricing and the application of fuel surcharges,” Larkin said.
STOCK PERFORMANCE: Shares of Union Pacific gained about 4.6 percent during the fourth quarter and about 11 percent over the last 12 months. They traded up $2.49, or 2.6 percent, to $97.80 Tuesday afternoon on the New York Stock Exchange.