Railroad transportation company Union Pacific Corp., (UNP) said on Monday that it is raising its third quarter earnings outlook, driven by lower diesel fuel costs and strong operating efficiency which is expected to more than offset the impact of recent hurricanes and lower volumes.
The Omaha, Nebraska-based company now expects third quarter earnings to be in the range of $1.28 - $1.33 per share, a 28% to 33% growth over the year-ago quarter. Previously the company projected earnings of $1.10 - $1.20 per share for the third quarter. On average, 14 analyts polled by First Call/ Thomson Financial expect the company to report $1.21 per share for the third quarter.
The current earnings guidance includes a reduction of about $0.10 per share, due to the widespread commercial power outages during Hurricane Ike, which impacted operations and limited the ability of customers to resume production, although UP's infrastructure did not sustain significant damage from the hurricanes.
The company said that the impact of Hurricanes Gustav and Ike were felt significantly in volumes, especially chemicals and industrial products. The company said that the current third quarter volumes are close to 5% lower than last year, hurt by fewer shipments of finished vehicles, automotive parts and intermodal containers. The current volumes data stayed below the company's previous expectations of a 1% to 2% quarterly decline.
The company's chairman and chief executive officer, Jim Young said, "Our team did a great job of preparing for and responding to Hurricane Ike. We deployed additional management, engineering and train crew resources to the area in advance of the storm. This helped us to quickly restore rail service to the affected areas, and we are working with our customers on their plans to resume operations."
The company expects the impact of the natural calamities as well as the weaker than anticipated volumes would be more than offset by the lower quarterly diesel fuel prices, ongoing efficiency gains as well as a favorable business mix.
The company benefited considerably by the fall in oil prices since July. The company expects the third quarter average diesel fuel price to be about $3.70 per gallon, which is lower than the previously forecasted price of $4.00 per gallon. As a result, the company expects the decline in diesel fuel price would add about $0.10 per share to third quarter earnings.
Commenting on the lower diesel fuel cost, UP's chief financial officer, Rob Knight said, "Since July, crude oil prices have dropped considerably, lowering our diesel fuel expense for the quarter. Because Union Pacific does not yet fully recover higher fuel costs through its various fuel surcharge programs, lower diesel fuel prices help our bottom line. This stronger than expected third quarter performance will change our full year earnings targets as well, but the magnitude is somewhat uncertain as we continue to review our outlook for fourth quarter volumes and fuel price."
Further, the company said that it continues to improve its performance operationally, increasing network velocity and improving terminal dwell times. Third quarter 2008 average train speed is up more than 10% versus third quarter 2007.
UNP closed Monday's regular trading session at $72.86, down $3.87 or 5.04% on a volume of 5.45 million shares. However, the stock gained $1.60 in the after-hour trade. In the past 52-week period, the stock has been trading in a range of $52.66 - $85.80.
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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.