Union Pacific Profit Beats Estimates as Grain Volumes Surge

January 23, 2014 09:00 AM

(Updates with volume increase in the third paragraph.)


Jan. 23 (Bloomberg) -- Union Pacific Corp., the biggest U.S. railroad, reported fourth-quarter profit that beat analysts’ estimates after a record corn crop increased shipments of agricultural products.

Net income climbed 13 percent to $1.17 billion, or $2.55 a share, from $1.04 billion, or $2.19, a year earlier, the Omaha, Nebraska-based company said today in a statement. The average of 25 estimates compiled by Bloomberg was $2.49.

Shipments of automobiles and industrial products also rose, increasing sales and profit and sparking a rise in total volumes for the first time in six quarters. Faced with declining coal tonnage, the railroad’s largest cargo, Chief Executive Officer Jack Koraleski is buying back more shares and improving efficiency to boost earnings.

Union Pacific’s strong volume and grain output are two areas of strength that will continue in the future, said Fadi Chamoun, a Toronto-based analyst with BMO Capital Markets who rates it outperform. "We think there is some room for them to drive more performance in 2014."

Union Pacific rose 2.5 percent to $172.78 at 9:31 a.m. in New York. The shares climbed 26 percent in the 12 months ended yesterday, as the Standard & Poor’s 500 Index gained 24 percent.

Operating revenue increased 7.2 percent in the quarter to $5.63 billion, exceeding the $5.57 billion average analyst estimate. Autos rose 17 percent to $544 million and industrial products increased 14 percent to $954 million, according to the statement.


Economy Strengthening


"We see signs that the economy is slowly strengthening," Koraleski said in the statement. "We’re well-positioned for economic growth."

U.S. farmers harvested a record 13.925 billion bushels of corn last year, up 30 percent from 2012’s drought-ravaged total. That helped revenue from hauling agricultural products surge 19 percent from a year earlier to $937 million.

Coal volumes declined 9.5 as an October blizzard in Wyoming slowed traffic from Powder River Basin mines, and revenue slipped 1 percent to $985 million.

Total carloads climbed 1.7 percent from a year earlier to 2.28 million, the first increase on that basis since the three months ended June 30, 2012, the company said in the statement.

Union Pacific’s operating ratio, an industry metric of efficiency that compares operating expenses to revenue, fell to 65 percent, the lowest ever fourth-quarter mark. A falling operating ratio indicates improved financial performance.


--With assistance from J. Kyle O’Donnell in New York. Editors: Molly Schuetz, John Lear


To contact the reporter on this story: Tim Catts in New York at tcatts1@bloomberg.net


To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

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