(The Associated Press circulated the following story by Joe Ruff on October 22.)
OMAHA, Neb. — Union Pacific Corp., which operates the nation’s largest railroad company, said its profit fell 38 percent in its third quarter as high fuel prices and service problems more than offset the impact of a rise in revenue.
The company earned $202 million, or 77 cents a share, in the period ended Sept. 30 compared with $317 million, or $1.21 a share, a year ago. Revenue rose to $3.08 billion from $2.96 billion a year ago.
Union Pacific’s latest earnings beat the consensus estimate of 75 cents a share from analysts surveyed by Thomson First Call.
Its shares rose 32 cents, or 0.5 percent, to close at $61 Thursday on the New York Stock Exchange.
Diesel fuel costs increased expenses by $121 million in the third quarter as fuel averaged $1.25 a gallon, up from 90 cents a gallon one year ago.
”Nobody had a crystal ball to see we would be at over $50 a barrel for oil, but here we are,” Union Pacific chief executive Dick Davidson said Thursday.
Service problems caused by a surging economy increased costs by about $44 million in the third quarter, while hiring and training new workers to meet demand cost $35 million and consolidating operations at its new headquarters in Omaha cost $23 million, railroad officials said.
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.
In response, Union Pacific has been hiring more workers and purchasing more locomotives to meet the demand, which has cut into profits.
Revenue was up in all sectors but energy and agriculture, with industrial products up 9 percent, chemicals up 8 percent, automotive up 4 percent and money brought in buy hauling toys and other goods up 7 percent.
”One fact that stood out clearly this quarter is that Union Pacific, and the entire rail industry, is experiencing unprecedented levels of demand,” Davidson said.
That demand is expected to continue, in part because of growth in Asian imports, Davidson said.
For the first nine months of the year, Union Pacific earned $525 million, or $2 a share, up from $1.03 billion, or $3.94 per share, a year ago. Revenue rose to $8.998 billion from $8.586 billion a year ago.
Union Pacific’s rails cover 23 states across the western two-thirds of the country. It is a leading carrier of low-sulfur coal and serves chemical companies along the Gulf Coast.