(The Associated Press circulated the following story by Ruthie Ackerman on December 18.)
NEW YORK — The U.S. economy may be slowing down, but Union Pacific, the largest railroad, is going full speed ahead on increased agricultural and chemicals segment revenue.
The Omaha, Neb.-based company reported its third-quarter earnings on Thursday, posting a net income of $532 million, or $2.00 per share in the third quarter, up from $420 million, or $1.54 per share, in the prior year.
Investors liked what they saw. The company’s shares shot up 4.5%, or $5.38, to $124.36 in afternoon trading on Thursday.
In fact, the transportation sector was on the upswing Thursday. The Dow Jones transportation average rose 0.2%, or 10.73, to 4,890.34. Meanwhile, an index of major United States railroads maintained by Revere Data shows that major U.S. lines are up 22.9% year-to-date, while the Standard & Poor’s 500 index has gained just 8.2%.
Union Pacific beat its own, and analysts, estimates. In July, the railroad forecast third-quarter profit would be $1.54 per share. Analysts polled by Thomson Financial expected $1.77 on revenue of $4.2 billion.
Meanwhile, Union Pacific’s total carload volume increased 1% for the quarter while its fuel-consumption rate decreased to a best-ever quarterly rate of 1.22 gallons per thousand gross ton-miles in the third quarter. That was down from 1.26 in the previous year. This shows that the company has been able to cut costs while increasing revenue.
Growth in energy, including coal and ethanol, aided the railroad. Freight revenue was up 8% for energy, 12% for agricultural products and 9% for chemicals.
“Near-term, we remain cautious on the economy and see challenges from rapidly increasing diesel-fuel prices,” said Chief Executive Officer Jim Young. “However, we are confident regarding opportunities to further improve returns through profitable revenue growth and greater productivity.”
The company continued to struggle with in its industrial products segment, which saw a 4% decline. That unit has been suffering in the past few quarters as the U.s. housing market sagged, reducing demand for construction materials.
To keep shareholders happy, the railroad repurchased more than 4.5 million shares of its stock in the third quarter at an average price of $115.93. Year-to-date purchases totaled 10.2 million shares, or 51% of the 20 million shares the company plans to repurchase. The company has about 266.2 million shares outstanding.
All the majory U.s. railroad operators were up on Thursday. Burlington Northern Santa Fe led the pack, jumping 3.0%, or $2.45, to $84.91, followed by CSX, which increased 1.7%, or 79 cents, to $46.13. On Tuesday, a major shareholder of CSX urged the company to improve its financial performance.
Norfolk Southern edged up 1.4%, or 73 cents, to $53.37.