Union Pacific Corp. rose the most in four months after the biggest North American railroad exceeded $1 billion in quarterly profit for the first time, beating analysts’ estimates on higher automotive and chemical shipments.
The shares gained 3.5 percent to $122.77 at the close in New York, for the biggest one-day increase since March 15 and the highest price in Bloomberg data dating to July 1980. Union Pacific has risen 16 percent this year.
Automotive shipments rose 15 percent while chemicals, which include material used in hydraulic fracturing for natural gas, increased 12 percent, the Omaha, Nebraska-based company said today in a statement. That helped Union Pacific overcome a drop of 17 percent in volumes for coal, its biggest freight category, amid low prices for natural gas. Prices for gas have dropped because of the increased supply from so-called fracking.
“It was a very, very strong quarter,” Brad Delco, a Little Rock, Arkansas-based analyst with Stephens Inc., said in a telephone interview. “Based on where their network is located around the Gulf, they have one of the strongest chemical networks and so combined low natural gas prices likely is driving a lot of activity in the chemical business.”
Net income advanced 28 percent to $1 billion, or $2.10 a share, from $785 million, or $1.59, a year earlier. The average of 26 estimates compiled by Bloomberg was for profit of $1.97 a share. Sales gained 7.5 percent to $5.22 billion, in line with analysts’ estimates. Revenue a year earlier was $4.86 billion.
“The net result was our best-ever quarter by nearly every financial measure,” Chief Executive Officer Jack Koraleski said in the statement.
Utility coal volumes may increase in the year’s second half, Koraleski said in an interview today.
“It certainly appears that we bottomed out at the second quarter and that volume levels are now increasing again,” he said. “Given the extreme temperatures we are seeing across the United States today it does look to us like we hit the low spot and we will do better from here.”
Jason Seidl, a New York-based analyst at Dahlman Rose & Co., said in a telephone interview that “the only thing you have to worry about with UNP right now is that it is hitting all-time highs. In the near term are some investors going to look to take some profits with all of the uncertainty that’s out there?”
Union Pacific’s results follow CSX Corp.’s July 17 report of second-quarter profit that beat analysts’ estimates as growth in container-car shipments eased the effects of sliding coal volumes.