Union Pacific Corp, the largest publicly traded U.S. railroad, reported a 14 percent jump in profit as coal shipments, its largest cargo, picked up and the company hauled more grains meant for export to Mexico and China.
Demand for thermal coal is expected to recover in the United States after two years of decline as power producers switch back to coal due to a recent run-up in natural gas prices.
U.S. coal miners Alpha Natural Resources and Arch Coal Inc said earlier this year that they expected demand for thermal coal to pick up due to severe winter weather, coupled with a fall in inventory levels at utilities.
“Lower inventories will continue to be a driver for our coal business in the second quarter,” Eric Butler, executive vice president of Union Pacific’s marketing and sales, said on a call with analysts.
Rival Kansas City Southern said coal shipments were better than expected in the first quarter and that it expects that strength to continue in the current quarter.
U.S. railroads are key indicators of the health of an economy because of the variety of goods they transport. Union Pacific connects 23 states in the western two-thirds of the United States.
The pick-up in shipments comes on the back of a severe U.S. winter that hit rail traffic and caused delays up to 48 hours.
Union Pacific’s coal shipments rose 7 percent in the first quarter ended March 31. Shipments had dropped 9 percent and 14 percent in the past two years.
Revenue in the company’s agricultural business, which ships a range of products such as frozen food, beer, oils and whole grains, rose 16 percent. Total revenue rose 6.6 percent to $5.64 billion.
Net income rose to $1.09 billion, or $2.38 per share, from $957 million, or $2.03 per share, a year earlier.
Analysts on average expected earnings of $2.37 per share on revenue of $5.70 billion, according to Thomson Reuters I/B/E/S. (Reuters)