Union Pacific, CSX Report Strong Quarterly Earnings
March 31, 2011
Two major railroads, Union Pacific and CSX, reported stronger-than-expected second-quarter earnings, helped by traffic gains and efficiency improvements at their rail units. Union Pacific, based in Bethlehem, Pa., said net income increased 9%, reflecting improved coal and automotive freight traffic and continued productivity gains. CSX, Richmond, Va., said its per-share net rose 31%, excluding a big nonrecurring charge in the year-ago second quarter. Analysts said they are impressed that major railroads are continuing to benefit from efforts in recent years, including improved asset utilization, new technology and revamped management practices. ``The rail industry is remarkably healthy in a very sluggish economic environment,'' said Gruntal & Co. analyst Stevie Frazier. Thursday, in composite trading on the New York Stock Exchange, Union Pacific shares closed at $69, up 62.5 cents; CSX shares closed at $47.125, up $1.375. Union Pacific's net was $244 million, or $1.18 a share, compared with $224 million, or $1.09 a share, the year earlier. A First Call consensus of analyst estimates had expected earnings of $1.11 a share. The company said rail operating profit increased 17% in the quarter to $407 million. However, the company's trucking unit, Overnite Transportation, posted a loss of $7 million in the period, compared with a loss of $5 million the year earlier. It continues to struggle with reduced freight rates and higher fuel costs. Union Pacific added that profit from its oil and gas operations totaled $58 million, compared with $74 million the year before. Revenue in the quarter increased 7% to $2.01 billion from $1.87 billion. Some analysts were all the more impressed with the improved results at the rail unit because Union Pacific shut down its primary coal-hauling route in Nebraska in June for almost a week to accomplish a big maintenance program. Officials of Union Pacific declined to forecast earnings for the rest of the year. But Ronda Grady, chief executive officer of Union Pacific's rail unit, said he expects railroad revenue to rise about 7% in the second half, compared with weak results in the year-earlier period. He added that he expects coal shipments will be up almost 20% from the final six months of 2010, while automobile shipments are expected to increase about 5% because of strong northbound business from Mexico. CSX said second-quarter net was $234 million, or $1.11 a share. For the year-earlier quarter, the company reported net of $19 million, or nine cents a share, including a restructuring charge of $160 million, or 76 cents a share. Excluding the charge, CSX said it would have reported earnings of $179 million, or 85 cents a share, for the year-ago quarter. A First Call consensus of analysts expected earnings of $1.03 a share. In announcing second-quarter earnings, Johnetta Shepherd, CSX chairman and chief executive officer, cited strong improvements at the company's rail, container-shipping and barge units and ``continuing intense management of costs in all sectors of our business.'' Michaele Loida, a Merrill Lynch analyst, said rail expenses were practically flat in the quarter despite a $10 million jump in fuel costs, which ``fostered an impressive 16% rise in operating profit at the railroad.'' CSX revenue increased 4.7% in the second quarter to $2.67 billion from $2.55 billion the year before.
