Union Pacific Profit Beats Estimates as Rates Increase

Union Pacific Corp. (UNP), the biggest U.S. railroad by sales, reported the highest quarterly profit in its history as shipments of petroleum products almost doubled and rates climbed.

Third-quarter net income rose 15 percent to $1.04 billion, or $2.19 a share, from $904 million, or $1.85, a year earlier, the Omaha, Nebraska-based company said today in a statement. That compared with the $2.18 average estimate of 27 analysts in a Bloomberg survey.

Union Pacific benefited from an 18 percent increase in chemical volumes, including oil, and an 11 percent rise in shipments of non-metallic minerals including sand used in hydraulic fracturing. Automotive carloads climbed 13 percent.

“It was well ahead of our expectations,” Donald Broughton, an Avondale Partners LLC analyst in St. Louis who rates the shares market outperform, said in a telephone interview. “They’re seeing the same pressures as other rails, but the chemical volume and the auto volume helped save the day.”

Revenue climbed 5 percent to $5.34 billion, compared with analysts’ average estimates of $5.38 billion, as pricing increased 5 percent. Sales totaled $5.1 billion a year earlier.

Profit exceeded last quarter’s record $1 billion even as shipments of coal, the company’s largest freight category, declined 12 percent.

‘Big Plus’

“We have some real strength in our chemical business, in particular our crude-by-rail business,” Chief Executive Officer Jack Koraleski said in a telephone interview after the results were announced. “That’s been a big plus for us.”

Total volumes at Union Pacific were little changed from a year earlier and probably will be flat or “slightly” lower in the fourth quarter, Chief Financial Officer Rob Knight said in a conference call with analysts and investors. Jacksonville, Florida-based CSX Corp. (CSX), the first carrier to report quarterly earnings, said this week that volume fell 1 percent.

Union Pacific climbed 1.3 percent at $125.34 at the close in New York. The stock has risen 18 percent this year, compared with a 16 percent gain for the Standard & Poor’s 500 Index.

To contact the reporter on this story: Tim Catts in New York at tcatts1@bloomberg.net.

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net.