Union Pacific Corp., the second-biggest U.S. railroad, posted a quarterly profit that beat analysts' estimates as a 56 percent plunge in its fuel price helped blunt a drop in shipping demand, Bloomberg News reports.
Second-quarter net income fell 12 percent to $468 million, or 92 cents a share, from $531 million, or $1.02, a year earlier, the Omaha, Nebraska-based company said today in a statement. Sales decreased 28 percent to $3.3 billion.
The railroad's average cost for diesel fuel tumbled to $1.57 a gallon from $3.60 a year earlier. The savings contributed to a 30 percent drop in operating expenses, as freight volume dropped 22 percent.
"Union Pacific produced solid second-quarter results despite a business environment that continues to be extremely challenging," Chief Executive Officer James Young said in the statement.
Excluding a gain from a land sale, profit was 78 cents a share, Union Pacific said. On that basis, the average of 15 analyst estimates compiled by Bloomberg was 75 cents.
Union Pacific has furloughed 5,300 conductors, engineers and other employees and parked 66,000 freight cars, Chief Financial Officer Rob Knight said last month. Crude oil that averaged 52 percent less in the second quarter than a year earlier helped shrink Union Pacific's bill for diesel fuel.
U.S. rail-freight volumes fell 19 percent this year through July 11, according to the Association of American Railroads.
Burlington Northern Santa Fe Corp., the largest U.S. railroad by sales, is scheduled to report earnings after 4 p.m. New York time today.
(The preceding report by Craig Trudell was published July 23, 2009, by Bloomberg News.)
(Union Pacific issued the following on July 23, 2009.)
OMAHA, Neb. Union Pacific Corporation (NYSE: UNP) today reported 2009 second quarter net income of $468 million, or $0.92 per diluted share, compared to $531 million, or $1.02 per diluted share for the second quarter 2008. Included in the second quarter 2009 net income is $72 million, or $0.14 per diluted share, related to a June land sale to Colorado's Regional Transportation District.
Second Quarter 2009 Highlights
* Operating income totaled $751 million, down 19 percent. * Net income declined 12 percent to $468 million. * On-going efficiency and pricing gains contributed to a record second quarter operating ratio of 77.3 percent. * Average quarterly diesel fuel prices decreased 56 percent to $1.57 per gallon. * Customer Satisfaction Index of 87 tied a quarterly best, up 4 points.
"Union Pacific produced solid second quarter results despite a business environment that continues to be extremely challenging," said Jim Young, Union Pacific chairman and chief executive officer. "This performance demonstrates our unrelenting focus on safety, productivity and customer service, which helped drive lower costs and improved returns."
Second Quarter Summary
The continued weak global economy affected all six of Union Pacific's business groups. Second quarter 2009 operating revenues totaled $3.3 billion versus $4.6 billion in the second quarter 2008. In addition:
* Business volumes, as measured by total revenue carloads, were down 22 percent versus the second quarter 2008. Reflecting lower volumes, year-over-year freight revenues declined 28 percent to $3.1 billion in the second quarter 2009. Lower fuel surcharge revenue in the second quarter, down over $500 million year-over-year, contributed to this decline. * Quarterly diesel fuel prices decreased 56 percent from an average of $3.60 per gallon in the second quarter 2008 to an average of $1.57 per gallon. The second quarter 2009 fuel consumption rate, measured by gallons per thousand gross ton-miles, declined 6 percent to a quarterly best rate of 1.142. * Second quarter 2009 operating ratio improved 2.3 points to 77.3 percent, in part as a result of the Company's on-going efficiency initiatives and pricing gains. Union Pacific's ongoing safety performance contributed about 1 point to the quarterly operating ratio improvement. A semi-annual actuarial study identified continued safety improvements and lower estimated settlement costs, resulting in a $38 million casualty expense reduction year-over-year. * Union Pacific's Customer Satisfaction Index improved 4 points to 87, matching the Company's best quarterly mark. * Quarterly train speed, as reported to the Association of American Railroads, was 27.4 mph, up nearly 5 mph or 20 percent versus the second quarter 2008. This improvement reflected productivity and operational improvements as well as lower volumes. * In June 2009, the Company closed a land sale to Colorado's Regional Transportation District, resulting in a $116 million pre-tax gain, adding $72 million to net income.
Summary of Second Quarter Freight Revenues
* Agricultural was down 21 percent. * Energy was down 22 percent. * Intermodal was down 23 percent. * Chemicals was down 24 percent. * Industrial Products was down 39 percent. * Automotive was down 54 percent.
Outlook
"Although we expect it will be some time before the economy recovers, it appears that volume levels may have hit the bottom as the economy seems to have stabilized," Young said. "Despite these economic challenges, we are dedicated to running a safe and productive network, maintaining our competitive advantages that come from excellent customer service and being a fuel efficient and an environmentally friendly railroad."
