(The following story by John D. Boyd appeared on The Journal of Commerce website on March 29, 2010.)
WASHINGTON, D.C. — Union Pacific Railroad “will continue to generate core price increases of roughly 4-6 percent over the next few years,” said stock analyst Lee A. Klaskow of Longbow Research.
Klaskow said in a report to investors that UP’s rate increases would be “partly supported by legacy re-pricing opportunities” as old contracts with various freight shippers come up for renewal at new rates.
Another factor buoying UP’s rate and profit outlook, he said, is that it has taken some intermodal market share over the last year from western-U.S. rival BNSF Railway, by wooing Hub Group’s container business that previously went on BNSF.
Intermodal has been a weak link in rail pricing in recent years as railroads fought to hold share while truckers were slashing their rates to move containers and trailers on highways instead. But new strength in the economy has lifted intermodal volume, while new UP contracts with a couple of shipment consolidators are helping stabilize rail rates for the box moves.
Compared with other major railroads, Klaskow said, UP “deserves a slight premium” in an industry outlook, “since it has the most re-pricing opportunities and potential for continued intermodal market share gains.”