(The Associated Press circulated the following article on June 9.)
OMAHA, Neb. — Rising fuel prices and costs of hiring train crews and improving delivery speed will cut into second quarter profits at the nation’s largest railroad, Union Pacific Corp. said Wednesday.
Earnings will range from 60 cents to 65 cents per share in the second quarter ending June 30, compared with $1.05 per share in the same period last year, Union Pacific said.
The forecast is also well below the consensus estimate of 96 cents a share by analysts surveyed by Thomson First Call.
Shares of Union Pacific fell $1.21, about 2 percent, to close at $58.78 Wednesday on the New York Stock Exchange.
Union Pacific has been struggling with a crew shortage and rail congestion since last fall, when the economy began picking up. The railroad also was surprised by the number of engineers and conductors taking retirement under new federal rules.
Diesel fuel prices are expected to average about $1.15 per gallon in the second quarter, an increase of more than 30 percent or 27 cents per gallon over the same period last year, the railroad said.
While earnings will be down, demand is up, the railroad said. Second quarter commodity revenue is expected to grow by about 5 percent to record levels, officials said.
The railroad’s average train speed for April and May was 21.2 mph, about 11 percent below last year’s second quarter and 3 percent below the first three months of this year, Union Pacific said. Train speed increased to 21.8 mph in the first week of June, officials said.
The average time trains spent in terminals for April and May was 35.4 hours, about 18 percent worse than the second quarter of 2003 and 2 percent worse than this year’s first quarter. Dwell time for the first week of June averaged 33.8 hours.
“Although the return to network fluidity continues to be a slow process, we are confident we have the right initiatives underway to improve operations and restore our service quality,” said Dick Davidson, chairman and chief executive.
In the first six months of this year, the railroad expects to graduate more than 2,000 conductors, with another 1,400 are expected to graduate in the third quarter, Davidson said.
New locomotives are being brought on line, including accelerated delivery of 125 locomotives in the second half of this year instead of next year, Davidson said.
Union Pacific’s rail lines cover 23 states in the western two-thirds of the country. It is a leading carrier of low-sulfur coal used in electrical power generation and has broad coverage of the large chemical- producing areas along the Gulf Coast.