(Bloomberg News circulated the following story by Angela Greiling Keane on September 22.)
WASHINGTON, D.C. — Union Pacific Corp., the largest U.S. railroad, forecast third-quarter earnings that exceeded analysts’ estimates as it hauled higher-profit freight and fuel prices fell.
Earnings will be $1.28 to $1.33 a share, topping the previous projection of $1.10 to $1.20, the Omaha, Nebraska-based carrier said today in a statement. Analysts expected $1.21 a share, the average of 15 estimates compiled by Bloomberg.
The decrease in fuel bills helped offset the effect of Hurricanes Gustav and Ike, Union Pacific said. The storms, especially Ike, will pare earnings by 10 cents a share on lower volumes to and from the U.S. Gulf Coast, while fuel’s slide will boost results by the same amount.
“This stronger-than-expected third-quarter performance will change our full-year targets as well, but the magnitude is somewhat uncertain,” Chief Financial Officer Rob Knight said in the statement.
Results were buoyed by better operating efficiency and a “favorable business mix,” meaning shipments of higher-margin goods, the railroad said, without specifying the types of cargo.
Union Pacific gained 2.2 percent to $74.46 at 5:44 p.m. after the close of regular New York Stock Exchange trading. Earlier, the shares fell $3.87, or 5 percent, to $72.86.
Both hurricanes disrupted service for Union Pacific and the four other big U.S. railroads in states along the Gulf Coast. Houston, where Ike caused power outages and flooding, is a Union Pacific hub.
While Union Pacific said its tracks and yards didn’t suffer significant damage, “widespread commercial power outages associated with Hurricane Ike have impacted operations and limited the ability of customers to resume production.”
Union Pacific gave its previous third-quarter forecast on July 24. The railroad said diesel fuel, once projected to average $4 a gallon this quarter, instead will be about $3.70. Falling fuel prices typically add to revenue because surcharges levied on shippers lag behind costs, Union Pacific said.