(Dow Jones Newswires circulated the following story by Bob Sechler on March 11, 2009.)
NEW YORK — Union Pacific Corp.’s (UNP) first-quarter freight volumes have fallen about 22% through March 7, but a top executive of the railroad said the trend may have bottomed.
“It feels like we may have reached a floor” because weekly carloads have been steady through much of the quarter, Chief Financial Officer Rob Knight said Wednesday, speaking during a JPMorgan transportation conference.
Knight also said Union Pacific is confident it can raise its core prices by 5% to 6% this year, although he acknowledged “some investors are increasingly skeptical on pricing” given the demand declines. Core prices don’t include fuel surcharges.
As for volume, he said shipping in the auto sector has led to the first- quarter drop, with a 53% slide in carloadings through March 7.
Volume was off 25% in the industrial sector during the timeframe, 20% in the chemicals sector and 12% in the agriculture sector. Volume in the intermodal sector, which is tied closely to consumer spending, was off 25%.
Still, Knight pointed to several reasons for optimism in the near-term, including easier comparisons in the second half as well as increased mandates for ethanol production and the upcoming 2009 agricultural harvest.
He also noted Union Pacific stands to benefit from federal stimulus spending.
“We have the ability to move the materials to construct those (federally funded) projects,” Knight said.
Meanwhile, he got in some plugs for the importance of a healthy railroad sector overall. Rising prices in the sector have fueled some political fallout, and a bill recently approved by the Senate Judiciary Committee would repeal legal provisions that exempt railroad mergers from antitrust law and that allow freight railroads to engage in collective bargaining.
But Knight said railroads are cost-intensive and must be allowed to reap returns on the large amounts of capital spending they require. He also said they benefit the public through reduced congestion, emissions and fuel usage, among other things.
Union Pacific shares were up 3.6% recently, or $1.27, at $37.09.