(The following story by Stacie Hamel appeared on the Omaha World-Herald website on July 22.)
OMAHA — Following up on its warning of last month, Union Pacific Corp. announced second quarter earnings Thursday of 60 cents per share, a 43 percent drop from the same period last year.
The Omaha-based company, which operates the nation’s largest railroad, lowered its earnings forecast in early June to 60 cents to 65 cents per share for continuing operations as it fought continuing service delays and congestion that began last fall.
In the second quarter, record revenue and shipping volume couldn’t overcome the costs of hiring thousands of train service workers, adding hundreds of locomotives and burning 346 million gallons of high-priced diesel, said chairman and chief executive Dick Davidson.
The railroad also has reduced the number of trains in some areas, limited some types of shipments and stopped seeking new customers as demand shot beyond expectations.
“We know we aren’t living up to the potential of this great company, but we remain absolutely focused on resolving the operational issues that have temporarily limited profitability,” he said.
Davidson said the company expects third-quarter earnings of 75 cents to 85 cents a share.
By the end of 2004, Davidson said, the railroad will have trained 5,000 more train crew workers, acquired nearly 750 more locomotives and will be better at managing volume.
“We believe these efforts will eventually allow us to catch up with the strong demand, improve network fluidity and operate more efficiently so that we can translate this demand into bottom-line results.”
Railroad president Jim Young said during the morning presentation to Wall Street analysts in New York City that June was U.P.’s 10th month of record carloadings. Despite slowdowns in parts of the 23-state system, the railroad still is hauling more freight than ever before, he said.
U.P. reported net income from continuing operations of $158 million, or 60 cents per diluted share, on a record $3 billion in revenue for the quarter ended June 30. For the same period in 2003, U.P. reported earnings of $275 million, or $1.05 per share.
For the quarter, revenue from chemical products was up 9 percent; from industrial products, up 8 percent; from agricultural products, up 7 percent; and intermodal revenue – containers that move among ship, truck and rail – was up 6 percent.
Congestion has eased somewhat recently, said spokeswoman Kathryn Blackwell. Traffic has been moving fluidly on the critical Sunset Route from Los Angeles to El Paso, Texas, for several weeks, she said.
“It’s still not moving as quickly as we’d like it to, but it is fluid,” she said.
Although congestion has worsened in the Houston area, the Pacific Northwest has improved, she said. And U.P. is caught up on the ports.
Union Pacific’s stock price dropped 82 cents to $56.56 per share Thursday morning.