(The Associated Press circulated the following article on January 24.)
OMAHA, Neb. — Union Pacific Corp., which operates the nation’s largest railroad, reported Monday an 86 percent drop in net income for its fourth quarter, citing high fuel prices, increased operating costs and a charge for asbestos claims.
It warned earnings for the first quarter will be below Wall Street expectations.
Net income was $79 million, or 30 cents a share, for the period ended Dec. 31 compared with net income of $551 million, or $2.12 a share, a year ago. Revenue was $3.2 billion, up from $3.0 billion a year ago.
Without the $154 million asbestos charge, Union Pacific would have earned 88 cents a share from continuing operations, 4 cents a share higher than forecast by analysts surveyed by Thomson First Call and 1 cent higher than Union Pacific’s own outlook issued last month.
The railroad has suffered all year from an unexpected burst of business and not enough train crews or locomotives. It has responded by hiring more people and adding locomotives to its fleet.
For the year, Union Pacific earned $604 million, or $2.30 a share, down from $1.6 billion, or $6.04 a share, a year ago. Revenue for the year rose to $12.22 billion from $11.55 billion in 2003.
Storms in California and Nevada that snarled the railroad’s traffic in the West this month could cost more than $200 million in repairs and lost income for this year’s first quarter, or 25 cents to 30 cents a share, though some of that will be recovered from insurance, Union Pacific chairman and chief executive Dick Davidson said.
Earnings in the first quarter could be between 25 cents and 35 cents a share, compared with 63 cents a share in the first quarter of 2004, Davidson said. Analysts surveyed by Thomson First Call had expected about 58 cents a share.
Shares of Union Pacific fell $1.47, or 2.4 percent, to close at $58.94 in Monday trading on the New York Stock Exchange, and have fallen from a 52-week high of $67.68 in late December.
With high demand expected to continue, the railroad is redesigning its operations in a “Unified Plan” that includes higher prices, turning down less profitable business and increasing the number of nonstop trains, Union Pacific officials said.
The program will be implemented in the first half of this year and results should begin to show in the second half, the railroad said.