Northwest Arkansas Democrat-Gazette
Coal-toting lifts rail line profits
Union Pacific tops forecasts as prices offset flat volume
Union Pacific Corp.’s shipments of coal and chemicals jumped in the first quarter, helping the largest publicly traded railroad to post profit above analysts’ expectations.
Earnings were $ 2.57 a share, up from $2 a year earlier, the Omaha, Neb.-based company said Thursday in a statement. Analysts expected $2.53 on average, according to estimates compiled by Bloomberg. Revenue rose to $5.86 billion, while analysts had predicted $5.75 billion.
Profit was driven by robust pricing that helped increase revenue per carload by 12% even as freight volume only rose 4.1%.
The results show Union Pacific is capitalizing on higher rail freight prices and a favorable economic environment even as it faces challenges from gummed-up networks. North American railroads continue to grapple with slower trains and increased times for railcars that sit in switching yards, crimping their ability to increase carloads and take advantage of shippers who are seeking to save on transportation by using rail over trucks.
Chief Executive Officer Lance Fritz noted that operations weren’t up to expectations, but he said in the statement that “Union Pacific translated revenue growth from a strong economy, our focused business development initiatives, core pricing gains and positive business mix, into solid financial results.”
Union Pacific shares fell 1% Thursday in New York, closing at $244.40. The stock slipped 1.9% this year through Wednesday, compared to a 6.4% decline in the S&P 500 Index.
Congestion caused intermodal, which are containers that can be hauled by ship, train and truck, to drop dur
ing the quarter even as shippers look to use rail over trucks. Union Pacific also was affected by the jump in diesel because it typically takes a couple of months to update fuel surcharges, creating a lag for passing through that cost to shippers.
Operating ratio, which is an efficiency measure in which a lower number is better, improved to 59.4% from 60.1% a year earlier as higher fuel costs were offset by mild weather during the quarter as opposed to wide-spread snow storms in 2021. The company backed off slightly on its full-year operating ratio target of 55.5% set in January, saying it now expects a number “beginning with 55” because of “pressure from rising fuel prices and current operational performance.”
“We are taking actions to improve resource utilization, increase crews and locomotives where needed, and reduce freight car inventory levels to restore fluidity,” Fritz said.
During the quarter, Union Pacific was helped by a surge in coal shipments as customers seek alternatives to natural gas, which spiked after Russia attacked Ukraine in February. Coal, which is among the highest-profit commodities for railroads, combined with renewables jumped 29% from a year earlier. Chemical and plastics shipments rose 14%. Intermodal carloads fell 4.9%.