OMAHA, Neb. (AP) — Union Pacific railroad’s second-quarter profit grew 10 percent despite the challenges of severe Midwest flooding and higher fuel costs.
The railroad said price increases and an 11 percent jump in the number of carloads of chemicals and agricultural products it carried helped it generate $785 million net income, or $1.59 per share, in the quarter. That’s up from $711 million net income, or $1.40 per share, last year.
Union Pacific incurred flood-related expenses of about $14 million in the quarter and lost about $20 million of coal revenue because of flooding. Those things cost the railroad about 4 cents per share of profit.
The railroad, based in Omaha, said revenue grew 16 percent to $4.86 billion over last year’s $4.18 billion.
Analysts surveyed by FactSet expected Union Pacific to report net income of $1.58 per share on revenue of $4.74 billion.
Union Pacific Chairman and CEO Jim Young said he’s optimistic about the second half of the year because the railroad should be able to increase prices on some contracts and shipping volumes should still increase even with the economic uncertainties.
Young said even with the lingering questions about the U.S. debt dilemma and slow economic growth he’s counting on several factors to boost volume in the fall: farmers will still harvest a crop, the current heat will drive demand for coal, automotive shipments should improve as Japanese companies rebound from the tsunami and Christmas will still come.
“I’m pretty confident you’re going to see stronger volumes here second half,” Young said during a conference call.
Union Pacific said overall shipping volume grew 3 percent in the quarter with the biggest increases coming in its chemical and agricultural businesses. But volume was up in all of its businesses except intermodal shipping where the railroad moves containers taken off ships and trucks.
Most of the growth in agricultural shipping volume was related to increases in wheat and feed grain exports over last year’s relatively weak volumes. Ethanol shipments continued to grow, and Union Pacific saw a 28 percent jump in imported beer shipments.
The railroad said diesel fuel costs increased 44 percent to an average of $3.29 per gallon from last year’s $2.29. It spent $904 million on fuel in the quarter. Union Pacific said net fuel costs hurt earnings by about 2 cents per share after its fuel surcharges are accounted for.
Union Pacific’s results are watched closely, because the major freight railroads are considered gauges of the nation’s economic health. Railroads carry cars, chemicals, crops, containers of imported goods and lumber across the nation, so railroad profits are tied to the health of those industries.
Union Pacific is the nation’s largest railroad. It operates 32,400 miles of track in 23 states from the Midwest to the West and Gulf coasts.
Union Pacific Corp.: www.up.com