Union Pacific quarterly profit beats estimates on price gains

Union Pacific quarterly profit beats estimates on price gains

Union Pacific Corp on Thursday reported a quarterly profit that beat Wall Street estimates, as the U.S. railroad operator cut costs and raised prices to overcome the effects of severe flooding in the Midwest and ongoing U.S.-China trade tensions.

FILE PHOTO: Locomotives at Union PacificÕs Engelwood wait to return to service near downtown Houston
FILE PHOTO: Locomotives at Union Pacific's Engelwood rail yard wait to return to service near downtown Houston, Texas, U.S. on September 6, 2017. REUTERS/Nick Carey

REUTERS: Union Pacific Corp on Thursday reported a quarterly profit that beat Wall Street estimates, as the U.S. railroad operator cut costs and raised prices to overcome the effects of severe flooding in the Midwest and ongoing U.S.-China trade tensions.

Shares in the Omaha, Nebraska-based company rose 4.6per cent to US$172.14 in early trading.

Union Pacific's better-than-expected results arrived amid worries that cooling global economic growth and President Donald Trump's trade war have spurred a "freight recession" in the U.S. transportation industry.

East Coast railroad operator CSX Corp rattled the sector on Tuesday when it revised its 2019 revenue forecast to call for a slight drop - rather than a slight gain - following trade-related weakness in its intermodal and metals units.

Severe weather again tested Union Pacific's sweeping business overhaul. During the second quarter, the railroad's operating ratio declined 3.4 points to a company best of 59.6per cent. A lower ratio translates into higher profitability.

Operating ratio is expected to be lower in the second half than in the first half of 2019, when record flooding forced it to reroute trains, executives said on a conference call with analysts.

Net income at Union Pacific, which serves the Western two-thirds of the country, rose 4per cent to US$1.57 billion, or US$2.22 per share, in the second quarter. Analysts had expected a profit of US$2.14 per share in the quarter, according to IBES data from Refinitiv.

Total operating revenue fell 1per cent to US$5.6 billion. Freight revenue fell 2per cent as lower volumes offset core pricing gains.

Total operating expenses fell 7per cent to US$3.3 billion, helped by workforce reductions, yard closures and other efforts aimed at lowering costs and improving service.

(Reporting by Rachit Vats in Bengaluru and Lisa Baertlein in Los Angeles; Editing by James Emmanuel and Dan Grebler)

Source: Reuters

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