Union Pacific recalls some crews as profit beats estimates
(Bloomberg circulated the following story by Craig Trudell on July 23, 2009.)
NEW YORK 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.
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 railroads average cost for diesel fuel tumbled to $1.57 a gallon from $3.60 a year earlier. Savings from fuel and payroll cuts contributed to a 30 percent drop in operating expenses, as freight volume dropped 22 percent.
You cant save yourself to prosperity through cost cuts over time, Chief Executive Officer James Young said in a Bloomberg Television interview. When the economy turns around, and it will, well be prepared to handle the volume.
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 fell 8 cents to $59.15 at 4 p.m. in New York Stock Exchange composite trading. Earlier today, they rose to $62.22, the highest intraday price since Nov. 11, according to data compiled by Bloomberg.
The company had about 45,000 workers in the quarter, its lowest employment since its 1996 purchase of Southern Pacific Rail Corp., Young said.
The powerful multiyear productivity story continues to fire on all cylinders, Rick Paterson, an analyst at UBS Securities LLC in New York, said in a report today. He recommends buying shares of all four big U.S. railroads.
Recalling Workers
The railroad recalled some furloughed workers since June as weekly carload rates gained about a third from their low point three months ago, Young said. About 900 of the 5,300 conductors, engineers and other employees laid off as of mid-June have returned, said Tom Lange, a spokesman, in an e-mail.
Union Pacific also brought 6,000 rail cars out of storage as shipments rose in the past month. About 1,900 locomotives remain in storage until the economy improves.
When this thing starts to move, we will lever very nicely in terms of impact on our bottom line, Young said in an interview.
Coal volumes were at their lowest quarterly levels in nine years, Young told analysts on a conference call. The mineral is railroads biggest freight category by shipments. Because of strong volumes in 2008s second half, coal will continue to be down from a year earlier, he said.
Burlington Northern Santa Fe Corp. is the largest U.S. railroad by sales.
