Union Pacific Corp reported a 43 percent jump in first-quarter earnings as business volumes gained for the first time in two years, and the No. 1 railroad offered an optimistic outlook for a continuing economic recovery.
“What a difference a year makes,” Union Pacific Chairman Jim Young told analysts in a conference call. “We are feeling better about our opportunities.”
Young said though the strength and timing of a sustained economic recovery remained “cloudy,” growth opportunities for 2010 and beyond were good.
The Omaha-based company said net income in the quarter totaled $516 million, or $1.01 per diluted share, compared with $362 million, or 72 cents per diluted share in the first quarter of 2009.
Operating revenue for the first quarter was $4 billion, up from $3.4 billion a year earlier and the company’s operating ratio of 75.1 percent was the best ever for the first quarter.
Results beat analysts’ expectations for 95 cents a share, and 91 cents on a fully reported basis, on revenue of $3.8 billion.
Avondale Partners analyst Donald Broughton said the results underscored both the returning health of the railroads and the economy.
“The general economy is improving and Union Pacific is doing a very good job of taking advantage of it and leveraging to bring that to the bottom line,” Broughton said.
Overall, the railroad said the improving economy should help it push core pricing gains above the 3 percent in the first quarter, which was down from 6 percent a year earlier. Pricing in the second quarter is already up about 1 percent, officials said.
Chief Financial Officer Rob Knight said the first quarter should “mark the low price point” for pricing in 2010.
“We believe pricing will improve over the balance of the year,” Knight said.
Union Pacific said first-quarter business volumes, as measured by total revenue carloads, grew 13 percent versus the prior year’s recession-impacted levels.
Five of Union Pacific’s six business groups reported quarterly growth, with only energy volumes declining.
Intermodal revenue was up 25 percent to $691 million due to growth in imports. Automotive revenue increased 88 percent to $305 million driven by increased production in vehicles and parts, while chemical revenues were up 14 percent to $587 million helped by good fertilizer demand and growth in industrial chemicals.
Agricultural products revenue grew 10 percent to $730 million due in part to a near doubling of wheat exports through Gulf ports, while demand for ethanol, soybeans and soymeal also grew.
Industrial products gained 10 percent to $598 million while energy revenues were up 5 percent to $844 million.
Diminishing coal stockpiles amid a more stable economy should help that business improve this year, Union Pacific officials said.
The first-quarter results included the impact of a $45 million one-time payment related to restructuring an intermodal transportation relationship with CSX. (Reuters)