(Reuters circulated the following on June 19.)
NEW YORK — U.S. railroad Union Pacific Corp. on Thursday affirmed its full-year profit forecast, despite disruptions caused by Midwest flooding that will reduce second-quarter earnings about 5 cents per share.
The company said it expected to earn $3.88 to $4.13 per share for the year, compared with average analyst estimates of $4.06 per share. The numbers reflect last month’s 2-for-1 stock split.
“We’ve had a heck of a challenge,” Chairman and Chief Executive Jim Young told the Merrill Lynch Global Transportation Conference. “Every railroad in Iowa was shut down.”
Union Pacific runs 60 to 70 freight trains per day through the Cedar Rapids, Iowa, area, Young said. Its main line there is now open and railcar loadings will go back to normal within about 10 days, though train speeds may take a few weeks to return to normal.
Young said shipments of automobiles remain weak and will likely stay that way at least until the third quarter. By contrast, shipments of chemicals and petroleum products are not likely to fall off the rest of this year.
The company is “battling” high energy costs, Young said. The railroad pays about $4 per gallon for diesel fuel, up more than 50 cents since the end of the first quarter.
Earlier this week, Union Pacific said second-quarter earnings will be in the lower half of its projected range of 90 cents to 98 cents a share.
“Basically, we’ve lost our upside,” he said, adding that the company had a “very strong opportunity” to raise prices and pass on fuel costs.
Energy costs remain a challenge to the company’s long-term outlook, in part because they are beginning to affect consumer demand, but also because freight companies may face increasing competition from passenger traffic. Young said it would be a “mistake” for state and local governments to expand passenger rail service at the expense of freight capacity.
Separately, Young said the company was studying ways to ship more coal from the Powder River Basin to West Coast ports. Right now, nearly all of the coal from this region in Wyoming and Montana is shipped east.
Young said he expected demand for export coal to remain strong at least the next four years, driven in large measure by China’s power needs.