(The Associated Press circulated the following article on October 19.)
OMAHA, Neb. — Union Pacific Corp., the nation’s largest railroad operator, said Thursday its third-quarter earnings rose 14 percent on brisk demand from shippers and more efficient operation of its rail system.
Its profit increased to $420 million, or $1.54 per share, in the July-September period from $369 million, or $1.38 per share, during the same period last year. The year-ago results benefited from a tax savings equal to 44 cents per share, but damage from the hurricanes that hit the Gulf Coast and Florida weighed down last year’s results.
This year’s results were helped by a $23 million insurance settlement from the January 2005 West Coast storms.
Analysts polled by Thomson Financial forecast a profit of $1.47 per share.
Revenue in the period grew 15 percent to $3.98 billion from $3.46 billion, driven by double-digit growth in most of the railroad’s businesses. Analysts’ forecasts called for revenue of $4 billion.
Union Pacific said carload volume grew 3 percent in the third quarter as the railroad neared its peak season, and at the same time, the railroad reduced the amount of time trains spend sitting in rail yards and other terminals by 7 percent, to 26.2 hours on average. That dwell time figure is a key measure of operating efficiency.
Chief Executive Jim Young said the railroad has been improving efficiency every quarter, and this is the sixth consecutive quarter of operating income growth.
“We still have a long way to go,” Young said. “Our key here is handling record volume more efficiently.”
Strong demand has contributed to strong profits at Union Pacific this year, and the nation’s largest railroad has been working to become more efficient and reliable. Through the first three quarters, Union Pacific’s net income soared 54 percent over last year, to $1.12 billion on $11.62 billion in revenue.
Union Pacific has also benefited from better weather and fewer track problems this year. In 2005, the company was hurt by severe West Coast storms in January, derailments in Wyoming in May, hurricanes Katrina and Rita in August and September and flooding in Kansas in October.
“Mother Nature’s treated us well this year,” Young said.
The railroad said commodity revenue was again up from last year in all the major categories of its business. Agricultural revenue was up 19 percent, energy revenue was up 17 percent, industrial products revenue was up 15 percent, chemicals and intermodal revenue were both up 14 percent and automotive revenue was up 10 percent.
The peak season for railroads typically starts near the end of the third quarter in September, as products for the upcoming holiday season begin arriving at ports.
Its shares fell 79 cents to $90.51 a share in afternoon trading on the New York Stock Exchange. In the last few weeks, the stock had been climbing closer to the 52-week high of $97.49 that was set in April after dipping below $80 a share in August and September. And Union Pacific’s revenue fell just short of analysts’ $4 billion revenue target.
The company increased its earnings prediction for the full year Thursday to between $5.63 and $5.73, with commodity revenue growth of about 15 percent. Analysts expect annual earnings per share of $5.61 on average on revenue of $15.7 billion.
In the fourth quarter, Union Pacific predicts that it will earn between $1.50 and $1.60 per share, and commodity revenue will grow about 10 percent.
In early October, Union Pacific said it had set aside more than $3 billion for capital expenditures in 2007.
The railroad earmarked that money to improve its infrastructure in Wyoming’s coal-rich Powder River Basin and double-track its Sunset Corridor between Southern California and Texas over the next 4.5 years.
Union Pacific also announced plans this summer to invest about $90 million in an intermodal facility in San Antonio, because intermodal is one of the fastest-growing parts of the railroad’s business. Intermodal is the segment of Union Pacific’s business where it carries goods between other modes of transportation, such as when the railroad carries shipping containers from West Coast ports to trucking terminals in the interior of the country.
Union Pacific operates 32,400 miles of track in 23 states from the Midwest to the West and Gulf coasts.