Union Pacific Tops Estimates as Prices Trump Lower Cargo

Union Pacific Corp. (UNP), the biggest U.S. railroad, reported first-quarter profit that topped analysts’ estimates as higher pricing overpowered a decline in cargoes.

Net income rose 11 percent to $957 million, or $2.03 a share, the Omaha, Nebraska-based railroad said in a statement. That surpassed the $1.96 average estimate of 28 analysts surveyed by Bloomberg and compares with $863 million, or $1.79 a share, a year earlier.

Price increases pushed freight revenue up 3 percent even as falling agricultural and coal shipments pulled total volumes lower.

“We efficiently managed our operations in the face of dynamic volume shifts across the network,” Chief Executive Officer Jack Koraleski said in the statement.

Revenue from chemicals, fueled by petroleum products extracted from shale formations from North Dakota to Texas, rose 14 percent in the period, and automotive sales gained. Revenue from coal, the largest single cargo by volume, dropped 6 percent as utilities shifted to less-expensive natural gas produced from shale.

Union Pacific is “among the best positioned within the rail industry to deliver stable, reliable earnings growth,” John Mims, an Arlington, Virginia-based analyst at Friedman Billings Ramsey & Co., said in a note to clients before the results were announced. Mims has an outperform rating on the stock.

Total revenue at Union Pacific climbed 3.5 percent to $5.29 billion, the company said. That compares with an average analyst estimate of $5.21 billion.

The company’s operating ratio, an industry benchmark that compares expenses to sales, improved to 69.1 percent from 70.5 percent in last year’s first quarter.

To contact the reporter on this story: Frederic Tomesco in Montreal at tomesco@bloomberg.net

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

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