Union Pacific Corp. (UNP) rose to the highest since at least 1980 after the railroad’s second-quarter profit beat analysts’ estimates as crude oil shipments increased and coal volumes showed signs of stabilizing.
The shares gained 1.1 percent to $161.36 in New York, the highest closing price in data compiled by Bloomberg that begins in July 1980. They have advanced 28 percent this year, compared with an 18 percent gain for the Standard & Poor’s 500 Index.
“There was no bad news in the quarter,” Jason Seidl, a Cowen & Co. analyst in New York who rates the stock outperform, said in an interview. “The outlook is solid, with the back half of the year looking better than the first half. You’ll see the growth rate in earnings pick up in the third and fourth quarter.”
The results at the largest U.S. railroad fulfill Chief Executive Officer Jack Koraleski’s prediction that coal, the biggest cargo for Omaha, Nebraska-based Union Pacific, would rebound as utilities returned to the fuel amid climbing U.S. temperatures and natural gas prices. Revenue from hauling coal increased 12 percent to $975 million on volume that was little changed, the company said. Shipments of automobiles and industrial products also advanced.
Net income rose 10 percent to $1.11 billion, or $2.37 a share, from $1 billion, or $2.10, a year earlier, the railroad said today in a statement. That beat the $2.35 average of 28 analyst estimates compiled by Bloomberg.
Sales rose 4.8 percent to $5.47 billion, trailing the $5.5 billion average estimate of analysts. Total volume fell less than 1 percent to 2.25 million carloads, while average revenue per car climbed 5.5 percent, Union Pacific said.
Operating ratio, an industry gauge of expenses to revenue, fell to 65.7 percent, a record low, from 67 percent a year earlier, according to the statement.
Accelerating U.S. economic growth in the second half will help buoy Union Pacific’s results, Koraleski said in an interview today.
“The second quarter felt a little more sluggish for us,” he said. “We’re hopeful some of the sluggishness will go away.”
Growth in shipments of lumber, an indication of homebuilding activity, slowed to 11 percent in the second quarter from a year earlier, from 18 percent in 2013’s first three months.
To contact the editor responsible for this story: Ed Dufner at firstname.lastname@example.org.