Union Pacific Profit Beats Estimates on Grain ShipmentsTim Catts
Union Pacific Corp., the biggest U.S. railroad, climbed the most in more than nine months after a record corn harvest and the strengthening U.S. economy helped fourth-quarter profit beat analysts’ estimates.
Union Pacific rose 3.3 percent to $174.12 at the close in New York, the biggest gain since April 18, after the company forecast 2014 earnings will exceed last year’s record.
Shipments of automobiles and industrial products also rose, increasing sales and profit and sparking a rise in total volumes for the first time in six quarters. The Omaha, Nebraska-based company is well-positioned to take advantage of the economic recovery, Chief Executive Officer Jack Koraleski said in a telephone interview.
“We have a shot at a really nice, slow growth economy that will benefit the country, our customers and our shareholders,” Koraleski said. “I look at the economy and I’m seeing steady improvement, which I like because you always get suspicious when you see a spike and things start to get unsustainable.”
Net income climbed 13 percent to $1.17 billion, or $2.55 a share, from $1.04 billion, or $2.19, a year earlier, Union Pacific said today in a statement. The average of 25 estimates compiled by Bloomberg was $2.49.
Union Pacific’s strong volume and grain output are two areas of strength that will continue in the future, said Fadi Chamoun, a Toronto-based analyst with BMO Capital Markets who rates it outperform. “We think there is some room for them to drive more performance in 2014.”
Operating revenue increased 7.2 percent in the quarter to $5.63 billion, exceeding the $5.57 billion average analyst estimate. Autos rose 17 percent to $544 million and industrial products increased 14 percent to $954 million, according to the statement.
U.S. farmers harvested a record 13.925 billion bushels of corn last year, up 30 percent from 2012’s drought-ravaged total. That helped revenue from hauling agricultural products surge 19 percent from a year earlier to $937 million.
Coal volumes declined 9.5 as an October blizzard in Wyoming slowed traffic from Powder River Basin mines, and revenue slipped 1 percent to $985 million.
Total carloads climbed 1.7 percent from a year earlier to 2.28 million, the first increase on that basis since the three months ended June 30, 2012, the company said in the statement.
Union Pacific’s operating ratio, an industry metric of efficiency that compares operating expenses to revenue, fell to 65 percent, the lowest ever fourth-quarter mark. A falling operating ratio indicates improved financial performance.