(The following story by Jacob Taylor appeared at Investerms.com on July 29.)
Union Pacific Corporation (NYSE: UNP) shares surged higher Tuesday as the transportation sector exhibited unprecedented strength thanks to renewed confidence in the economy and lower oil prices. The railroad company recently reported higher-than-expected earnings that were up 24% despite rising fuel costs and flooding in the midwestern states.
The particularly strong finish to the quarter was driven by quickly restoring service to customers in these states, while continued productivity improvements helped improve the business’ margins. The results came as a surprise as many investors were expecting weaker results due to the flooding in the midwestern states and lower oil prices.
Freights carried by railroads increased across the board. Agricultural transportation exhibited the strongest growth, rising some 29 percent during the second quarter of 2008 compared to the same period last year. Meanwhile, energy was up 21%, chemicals were up 14%, industrial products were up 9%, and intermodal was up 7%.
Strong demand, low expectations, and lower fuel prices helped fuel the rally today. Many investors expect this trend to continue through 2008 and into 2009. Other railroad companies like Burlington Northern, Norfolk Southern, and CSX Corporation are also up strongly on the day. Shares of UNP are trading up $3.73, or 4.88%, to $80.32 in mid-day trading with others trading up in the 4% range.