Union Pacific profits surge 17%

CEO says firm is benefiting from delays on BNSF’s lines

Union Pacific locomotives pull a train in Council Bluffs, Iowa, last month. The railroad said Thursday that its quarterly revenue rose 10 percent to $6.02 billion.

Union Pacific locomotives pull a train in Council Bluffs, Iowa, last month. The railroad said Thursday that its quarterly revenue rose 10 percent to $6.02 billion.

Friday, July 25, 2014

OMAHA, Neb. -- Union Pacific Corp. said Thursday that its quarterly profit climbed 17 percent as the railroad hauled 8 percent more freight and raised shipping rates.

The Omaha-based company said it hauled more agricultural, automotive, intermodal, industrial and coal shipments. The only area where volume slipped 1 percent was in chemicals because crude oil shipments declined.

Union Pacific Chief Executive Jack Koraleski said those shipments show the economy is continuing to gradually improve.

"We are optimistic about the second half of the year," Koraleski said. "As always, we are closely monitoring the economic landscape, along with the major drivers across all of our business segments, including the potential impact of weather on grain and coal."

The railroad operator said profit increased to $1.29 billion, or $1.43 per share, in the second quarter. That's up from $1.11 billion, or $1.18 per share, a year ago. The analysts surveyed by Zacks Investment Research expected profit of $1.42 per share on average.

Union Pacific's earnings per share were helped by the railroad's purchase of 8.3 million shares of its own stock for $806 million during the quarter.

The railroad said revenue rose 10 percent to $6.02 billion from $5.47 billion in the same quarter a year earlier, and beat Wall Street forecasts. Analysts expected $5.98 billion, according to Zacks.

Citi analyst Christian Wetherbee said Union Pacific's solid results in the quarter are likely to continue to result in good stock performance for investors.

Its shares are up 22 percent since the start of this year and 28 percent over the past year.

Federal regulators proposed new rules Wednesday to improve the safety of railroads transporting crude oil and ethanol in the wake of several fiery accidents.

Koraleski said he wasn't surprised by the rules that call for better tank cars to carry flammable liquids and impose some restrictions on railroads because the industry has been working with regulators.

But he said Union Pacific will submit comments on the proposed rules and suggest some changes.

Union Pacific operates 32,400 miles of track in 23 states from the Midwest to the West and Gulf coasts.

Union Pacific has been taking market share from its main competitor, BNSF Railway Co., as BNSF train speeds slow and on-time deliveries drop.

The shift in market share had shown up in carload statistics, Koraleski said Thursday. During the second quarter, Union Pacific's loads rose 8.2 percent while those of BNSF, owned by Warren Buffett's Berkshire Hathaway Inc., gained 4.9 percent.

"There are some places where we've been able to pick up some share," Koraleski said. "We're hopeful that that has some stickiness to it and that that business will hang with us even as the BNSF recovers."

Railroad service operations across the United States have suffered after harsh winter weather earlier this year coupled with a surge in cargo to create a freight knot that's still being untangled. BNSF, based in Fort Worth, was affected most among U.S. rails because its network bore the brunt of a bumper grain crop and the exponential growth of crude oil from the Bakken oil fields in North Dakota.

Both Union Pacific and BNSF are the only two large U.S. railroads that operate west of the Mississippi River, with BNSF servicing more states to the north.

Mike Trevino, a spokesman for BNSF, declined to comment on the company's market share. The railroad hasn't yet filed its second-quarter earnings report.

Information for this article was contributed by The Associated Press, and Thomas Black of Bloomberg News.

Business on 07/25/2014