Shares of rail transportation provider Union Pacific Corp. (UNP) declined Thursday despite the broader market rally after it reported a 12% year-over-year decline in profit for the second quarter, hurt by double-digit drop in revenues across all six business groups amid the global economic downturn, as well as lower fuel costs and fuel surcharges. Adjusted earnings per share for the quarter dropper 23.5%, but topped analysts' expectations by two cents. Operating revenues slipped 28% and missed consensus estimate.
Association of American Railroads or AAR, recently announced that U.S. railroads originated 1.03 million carloads of freight in June 2009, down 19.7% with 255,668 fewer carloads, compared with June 2008. U.S. intermodal rail traffic was down 18.2% versus last year with 168,031 fewer trailers and containers. For the second quarter of 2009, total U.S. rail carloadings were down 22.4%, AAR said.
AAR Senior Vice President John Gray, said, "Whenever Americans grow something, eat something, mine something, make something, turn on a light, or get dressed, freight railroads are probably involved somewhere along the line. Unfortunately, right now there's not enough mining, manufacturing and buying going on. So railroads, like most other business sectors, are suffering because of it."
In a statement, chairman and chief executive officer, Jim Young said, "Union Pacific produced solid second quarter results despite a business environment that continues to be extremely challenging. This performance demonstrates our unrelenting focus on safety, productivity and customer service, which helped drive lower costs and improved returns."
Second Quarter Results
The Omaha, Nebraska-based operator of the largest railroad in North America reported net income of $468 million, or $0.92 per share in the second quarter, lower than $531 million, or $1.02 per share in the prior-year quarter. Net income increased from $362 million or $0.72 per share in the previous quarter.
The results for the latest quarter included $72 million or $0.14 per share, related to a June land sale to Colorado's Regional Transportation District.
Excluding the gain, adjusted net income for the latest quarter was $396 million or $0.78 per share. On average, 17 analysts polled by Thomson Reuters expected the company to report earnings of $0.76 per share for the second quarter. Analysts' estimates typically exclude special items.
Total operating revenues for the quarter dropped 28% to $3.30 billion from $4.57 billion in the same quarter last year, and missed the consensus estimate of $3.51 billion. Operating revenues declined marginally from $3.4 billion sequentially.
Peer Performance
Among Union Pacific's peers, earlier in the day, Fort Worth, Texas-based railroad operator Burlington Northern Santa Fe Corp. (BNI) reported a 15.4% year-over-year rise in profit for the second quarter to $404 million or $1.18 per share from $350 million or $1.00 per share, helped by cost controls and improved unit volumes, despite lower fuel surcharges and a drop in freight revenues across all segments amid the economic downturn. However, quarterly operating revenues dropped 26% to $3.32 billion from $4.48 billion last year.
Florida-based railroad operator CSX Corp. (CSX) reported last week a year-over-year decline in profit for the second quarter to $308 million or $0.78 per share from $385 million or $0.93 per share, hurt by lower volume as well as lower fuel surcharge recovery amid a broad-based weakness in the economy. Quarterly revenues declined 25% to $2.20 billion from $2.91 billion last year, due to a 21% drop in volume and lower fuel surcharge recovery. However, CSX said that there are some signs that the company may be seeing the bottom in many markets, indicating that demand has reached its worst point.
Montreal-based Canadian National Railway Company (CNI,CNR.TO) on Monday reported a year-over-year decline in profit for the second quarter to C$387 million or C$0.82 per share from C$459 million or C$0.95 per share, due to the depressed North American and global economies with lower volumes. Quarterly revenues slipped 15% to C$1.781 billion from C$2.098 billion in the prior-year period.
Segmental Details
Business volumes, as measured by total revenue carloads, decreased 22% from last year to 1.85 million carloads, pushing year-over-year freight revenues down 28% to $3.1 billion. Besides, a $500 million year-over-year reduction in fuel surcharges impacted the freight revenues. Average revenue per car load also declined 8% to $1.69 thousand from last year.
Freight revenues include revenues from energy, agricultural, chemicals, industrial, intermodal and automotive products. Revenues from energy dropped 22% to $715 million, agricultural revenue declined 21% to $618 million, chemicals revenues were down 24% to $499 million, and industrial products revenue slipped 39% to $531 million. Further, intermodal revenues dropped 23% to $595 million, and automotive revenues plunged 54% to $163 million.
Other Metrics
Operating ratio for the quarter improved 2.3 points to 77.3%, driven by the company's on-going efficiency initiatives and pricing gains. The company also reported a 4-point improvement in customer satisfaction index to 87, tied at the company's quarterly best.
Average diesel fuel price for the second quarter plunged 56% to $1.57 per gallon from $3.60 per gallon in the year-ago quarter.
Operating income for the second quarter declined 19% to $751 million from $931 million in the prior-year quarter. Total operating expenses was $2.55 billion, down 30% from $3.64 billion in the year-ago quarter. Expenses include fuel expenses of $370 million, a sharp 68% plunge from $1.16 billion last year.
The company ended the second quarter with cash and cash equivalents of $1.66 billion, compared to $611 million at end of the prior-year quarter.
Half Yearly Highlights
For the first six months, Union Pacific reported net income of $830 million or $1.64 per share, lower than $974 million or $1.89 per share in the prior-year period.
Total operating revenues for the year-to-date period dropped 24% to $6.72 billion from $8.84 billion in the same period last year.
Looking Ahead..........
"Although we expect it will be some time before the economy recovers, it appears that volume levels may have hit the bottom as the economy seems to have stabilized. Despite these economic challenges, we are dedicated to running a safe and productive network, maintaining our competitive advantages that come from excellent customer service and being a fuel efficient and an environmentally friendly railroad," Young added.
Stock Quote
UNP closed Thursday's regular trading at $59.15, down $0.08 or 0.14% on a volume of 8.97 million shares. In the past 52 weeks, the stock trended in a broad range of $33.28 to $85.80, with a three-month average volume of 5.12 million shares.
For comments and feedback contact: editorial@rttnews.com
June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.