(The following story by Joe Ruff appeared on the Omaha World-Herald website on January 24.)
OMAHA, Neb. — Union Pacific Corp. on Thursday reported a 1 percent increase in net income for its fourth quarter, driven by higher productivity and strong pricing despite flat volume and record-high diesel fuel prices.
Net income was $491 million, or $1.86 a share, for the three months ended Dec. 31. That compared with $485 million, or $1.78 a share, in the same period last year.
Revenue was up 6 percent in the fourth quarter, to $4.19 billion, from $3.96 billion the previous year.
The Omaha-based railroad’s stock price closed $3.95 higher at $120.96 in trading Thursday on the New York Stock Exchange.
For the year, Union Pacific had a 16 percent increase in profits, with net income of $1.85 billion, or $6.91 per share. That compared with $1.6 billion or $5.91 per share in 2006.
Revenue for the year was $16.28 billion, up 5 percent from $15.57 billion in 2006.
The nation’s largest railroad said it expected volumes to stay largely flat in 2008, ranging from minus 1 percent to plus 1 percent, and fuel prices to remain high. But increased productivity should help earnings per share grow by 12 percent to 19 percent to $7.75 to $8.25. For this year’s first quarter, earnings per share should be about $1.50 to $1.70, officials said.
Jim Young, Union Pacific’s chairman and chief executive, said he expected a slowing economy this year, but not a significant downturn. The economy remains a wildcard, however, Young said.
Union Pacific has been looking for over a year at productivity of its work force, and up to 300 administrative jobs have been cut in the past six months across the railroad’s operations.
Employment in Nebraska was up, however, Union Pacific spokesman Mark Davis said.
The effort at improving productivity will continue, Young said. However, the railroad wants to balance that with an ability to handle a surge in demand for its services.
“We have to maintain surge capacity,” Young said. “We are looking at every position in the company: What is the value? Can we do it better? I’m real excited about some of the things we see on the table this year.”
In the fourth quarter, Union Pacific said, fuel prices were up 34 percent, to $2.59 a gallon, compared with $1.94 a gallon in the same quarter the previous year. At the same time, fuel consumption was down to a fourth-quarter best, the railroad said.
Commodity revenue grew 6 percent, with chemicals up 12 percent, energy up 8 percent, agriculture up 7 percent, automotive and intermodal each up 4 percent and industrial products up 1 percent.
Average revenue per car was up 6 percent to an all-time quarterly record of $1,638 per car. Trains were being built longer, reducing the costs of train crew starts, officials said.
Pricing for a good return on investment and not volume will continue to be a focus, Young said. Union Pacific lost one intermodal contract recently because the return was not there, officials said.
Long-term contracts to be renegotiated this year make up about 6 percent of revenue, also potentially helping profits, officials said.