Union Pacific earnings soar on coal and corn traffic, just like BNSFs

Union Pacific Corp., which still calls itself the nation’s largest railroad operator, reported a 64 percent jump in fourth-quarter net income Thursday because of greater efficiencies and strong demand for the coal and agricultural products it ships.

Burlington Northern Santa Fe, UP’s biggest rival, reported similar improvements in earnings and business earlier in the week.

In the third quarter, Burlington Northern BNSF edged ahead of Union Pacific as the nation’s largest railroad by freight revenue, although UP’s total revenue was slightly higher because of sales by subsidiaries.

Both are big employers in Nebraska. BNSF Railway employs 4,400 people in the state, about 1,600 in Lincoln and 1,600 in Alliance. UP employs about 8,000 people in the state.

Both are recruiting help, hiring, building more track in a rail transportation boom that carries unprecedented loads of freight, coal and agricultural commodies through the state.

UP said it earned $485 million, or $1.78 per share, during the quarter that ended Dec. 31. That’s up from last year’s $296 million, $1.10 per share.

The result surpassed the expectations of analysts polled by Thomson Financial, who had forecast a profit of $1.57 per share.

Revenue grew 9 percent, to $3.96 billion from $3.62 billion, but was below analysts’ expectations for revenue of $4.03 billion.

Union Pacific said it posted improved revenue in five of its six business groups, led by 20 percent increases from shipping agricultural and energy-related commodities. Revenue from industrial products fell slightly.

”Overall, we turned in a great fourth-quarter performance ”” a strong finish to a record year,” said Jim Young, UP’s president and chief executive.

Throughout most of 2006, Union Pacific enjoyed relatively calm weather across most of its network, but in the first weeks of 2007, the railroad has already faced ice storms that caused widespread power outages and delayed shipments, said Jack Koraleski, executive vice president of sales and marketing.

The weather will likely reduce shipping volume by 4 to 5 percent across Union Pacific in January, and company officials expect the economy to remain slow for much of the first half of 2007.

But Union Pacific officials remain optimistic about the full year and predict revenue growth of 6 to 7 percent and growth in earnings per share 10 to 15 percent.

Union Pacific officials expect the biggest volume growth in its energy and intermodal shipping businesses as more ethanol plants continue to open and coal demand remains high. Intermodal service transferfreight among different types of transportation, such as loading shipping containers from oceangoing freighters onto rail cars for final delivery.

Railroad officials predict first-quarter earnings per share will fall between $1.25 and $1.35.

Union Pacific operates 32,400 miles of track in 23 states from the Midwest to the West and Gulf coasts.

On the Net:
Union Pacific Corp.: http://www.up.com