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Union Pacific Beats Estimates as Recovery Buoys Rail Volume

Union Pacific Corp., the biggest U.S. railroad, posted fourth-quarter profit that topped analysts’ estimates as U.S. economic growth fueled increases in volumes. The shares climbed to the highest in at least 31 years.

Net income climbed 24 percent to $964 million, or $1.99 a share, from $775 million, or $1.56, a year earlier, the Omaha, Nebraska-based company said today in a statement. Analysts had projected $1.82, the average of 25 estimates compiled by Bloomberg.

Carloads advanced 3 percent in the quarter, with auto and chemical shipments leading gains as a strengthening recovery boosted demand. Energy and industrial products deliveries also rose. Rate increases propelled revenue gains in each of Union Pacific’s business groups, the company said.

“Their core pricing was up 5 percent in the fourth quarter which is very solid considering where we are in the economy,” said Lee Klaskow, a Bloomberg Industries analyst in Skillman, New Jersey. He said the price increases are related to re-pricing of legacy contracts and improving customer service.

Union Pacific’s customer satisfaction index was 92 in the quarter, an increase of 2 points from the same period in 2010.

“If customers are happy with the service you’re providing, there’s going to be less pushback in terms of when you’re increasing your prices,” Klaskow said by telephone.

Sales Estimates

Revenue at Union Pacific rose 16 percent to $5.11 billion, compared with the analysts’ average estimate of $5.06 billion. The company’s ratio of operating expenses to sales, a measure of efficiency, declined to 68.3 percent, a fourth-quarter record, from 70.2 percent in the same period of 2010.

Union Pacific climbed 3.6 percent to $113.79 at 10:12 a.m. in New York trading. The shares earlier touched $114.46, the highest price since at least 1980.

The company expects “continued slow but steady economic growth” this year, Chief Executive Officer Jim Young said in the statement. Capital spending in 2012 should be about $3.6 billion, according to a presentation on the company’s website.

Union Pacific is the first major carrier to report financial results for the fourth quarter. CSX Corp. and Norfolk Southern Corp. plan to report next week. Union Pacific’s main rail competitor is Burlington Northern Santa Fe, which is owned by Berkshire Hathaway Inc.

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