(Bloomberg News circulated the following article on October 3.)
ST. LOUIS, Mo. — Union Pacific Corp., the largest U.S. railroad, raised its forecast for revenue growth next year to more than 6 percent, based on strong cargo demand, and said it will boost spending to add capacity.
Chief Executive Jim Young said revenue may grow by 6 percent to as much 8 percent in coming years, compared with previous guidance of 5 percent. Growth in freight will be as much as 4 percent a year, compared with an earlier projection of 2 percent, Young said Tuesday.
“We’re not calling Union Pacific ‘troubled’ anymore,” Anthony Hatch, an independent rail analyst in New York, said. “They’ve gotten themselves ‘decongested,’ for lack of a more glamorous term, and they’re participating in the kind of volumes that their peers have seen.”
Utilities’ demand for coal from Wyoming has created record 2006 shipments for Union Pacific and other railroads, boosting earnings throughout the industry. Power companies complain that railroads aren’t keeping up with their need for coal, one of the cheapest fuels for generating electricity.
Union Pacific will spend $3.2 billion next year to increase its capacity compared with $2.8 billion projected for 2006, Young said. Operational problems that had hurt the Omaha, Neb.-based company’s results are being resolved, Young said.
“We’re at peak of cycle when you think about economic health here, but the pricing environment has been very good,” Young said. “You’re not going to hear anybody on my team here declare victory at all, but we have a lot of momentum.”
Union Pacific’s first-half net income surged 94 percent to $701 million, or $2.58 a share, from $361 million, or $1.36 a share, a year earlier. Sales rose 18 percent to $7.63 billion from $6.5 billion.
Shares of Union Pacific rose 47 cents to $87.63 in New York Stock Exchange trading. The stock has gained 9.8 percent this year.