Union Pacific Corp., the largest U.S. railroad by sales, posted higher fourth-quarter earnings than analysts estimated as shipments of petroleum products and automobiles climbed.
Net income rose 7.5 percent to $1.04 billion, or $2.19 a share, topping the $2.16 average estimate of 27 analysts in a Bloomberg survey. That compares with earnings of $964 million, or $1.99 a share, a year earlier.
Profit exceeded $1 billion for the third consecutive quarter as a strengthening U.S. economy boosted demand for motor vehicles and extraction of crude oil from shale formations climbed. That helped to overcome a decline in coal volumes at the Omaha, Nebraska-based company as utilities switch to less expensive natural gas.
“There are great opportunities ahead of us in 2013 and beyond on oil-shale activity, and at the end of the day it could end up more than replacing what we lose from this point forward,” Chief Financial Officer Robert Knight said today in a telephone interview.
Fourth-quarter revenue climbed 2.8 percent to $5.3 billion, Union Pacific said. For the year, the company earned $3.94 billion, or $8.27 a share, on sales of $20.9 billion.
Petroleum-product shipments grew 69 percent from a year earlier to 62,700 carloads, helping to push chemicals revenue up 15 percent to $834 million, Union Pacific said. Motor vehicles and automobile parts accounted for $466 million of revenue, up 14 percent from the same period in 2011.
Coal volumes fell, with revenues from the commodity declining 7.5 percent to $990 million. Agricultural-products revenue fell 8.1 percent to $785 million in the fourth quarter after record drought struck the U.S. Midwest last summer.
CSX Corp. and Norfolk Southern Corp., the two largest U.S. eastern railroads, saw steeper declines in coal volumes in the fourth quarter, they said this week. Coal revenue declined more than 18 percent at CSX and 23 percent at Norfolk Southern.
Union Pacific, which operates mostly in the west, is well-positioned to benefit further from higher petroleum volumes as oil production booms due to hydraulic fracturing in areas including the Bakken Shale formation in North Dakota and Montana, said Donald Broughton, an analyst at Avondale Partners LLC in St. Louis.
“This is yet another strong quarterly performance out of these guys,” Broughton said. “They weren’t hurt as badly by coal as the eastern rails were and will continue to be and they’re really able to benefit in a big way from chemicals and petroleum from the fracking boom.”
Union Pacific fell 1.1 percent to $133.84 at the market close in New York. CSX and Norfolk Southern advanced 1.9 percent and 2.1 percent, respectively.
The company expects total volumes to climb “slightly” this year, assuming U.S. industrial production expands about 2 percent, Knight said during a conference call with analysts after the results were announced.