Union Pacific Profit Rises 22% as Demand Drives Rail Sector

Full Union Pacific Earnings Release can be found Here.

Wall Street Journal article by Tess Stynes:

Union Pacific Corp. said its fourth-quarter earnings rose 22% as the railroad operator continued to benefit from rail freight demand that has powered the sector.

Shares rose 2.3% to $116.99 in recent premarket trading as the results beat expectations. Through Wednesday’s close, the stock has risen 36% in the past 12 months.

Analysts have been expecting nearly all freight-rail companies to post strong resultsdespite a steep decline in prices for crude oil—one of the fastest-growing parts of the rail business. However, some analysts expect freight-rail operators could face stiffer truck competition as lower fuel prices will trim the price advantage trains have had over trucks in recent years.

While shipping crude oil isn’t a big part of Union Pacific’s business, rail congestion has been an issue for the whole sector. In its latest earnings report, Union Pacific noted that train speed had slowed 8% from a year earlier.

“Robust volumes challenged our network for much of the year, and we remained focused on adding the necessary resources to safely improve service,” Chief Executive Jack Koraleski said Thursday. “We are encouraged with the progress we are making.”

Union Pacific Corp. said its fourth-quarter earnings rose 22% as the railroad operator continued to benefit from rail freight demand that has powered the sector.

Shares rose 2.3% to $116.99 in recent premarket trading as the results beat expectations. Through Wednesday’s close, the stock has risen 36% in the past 12 months.

Analysts have been expecting nearly all freight-rail companies to post strong resultsdespite a steep decline in prices for crude oil—one of the fastest-growing parts of the rail business. However, some analysts expect freight-rail operators could face stiffer truck competition as lower fuel prices will trim the price advantage trains have had over trucks in recent years.

While shipping crude oil isn’t a big part of Union Pacific’s business, rail congestion has been an issue for the whole sector. In its latest earnings report, Union Pacific noted that train speed had slowed 8% from a year earlier.

“Robust volumes challenged our network for much of the year, and we remained focused on adding the necessary resources to safely improve service,” Chief Executive Jack Koraleski said Thursday. “We are encouraged with the progress we are making.”

Looking ahead, “Clearly, one of the biggest uncertainties is the outlook for energy markets, which will bring both challenges and opportunities,” he said.

Overall, Union Pacific reported a profit of $1.4 billion, or $1.61 a share, up from $1.17 billion, or $1.27 a share, a year earlier. Revenue increased 9.3% to $6.15 billion.

Analysts polled by Thomson Reuters expected per-share profit of $1.51 and revenue of $6.1 billion.

Total revenue carloads—or volume—improved 6%, led by industrial products, which climbed 15% and coal, which grew 9%. Intermodal volume increased 11%.

Average quarterly diesel fuel prices fell 14%.