Thursday, Rail transportation provider Union Pacific Corp. (UNP) posted lower profit in the first quarter, dragged by 21% decline in carloads. Meanwhile, earnings per share fell 15%, but surpassed the Street view.
As the recession has taken its toll on almost all sectors, the economy is further tapering off, affecting railroad demand significantly as well in the first quarter. For the first three months of 2009, total U.S. rail carloadings were down 16.3% to 3.25 million carloads, the Association of American Railroads or AAR reported.
AAR Senior Vice President John Gray said, "A blizzard in the Wyoming coal fields, flooding in the Midwest, and other weather-related problems added a 'kick them when they're down' element to the month, dropping already-depressed rail traffic levels even further in March."
Q1 Review
The Omaha, Nebraska-based company's first-quarter net income totaled $362 million, down 18% from $443 million in the prior year quarter. Per share earnings dropped 15% to $0.72 from $0.85 earned in the same quarter of last year.
On average, 17 analysts polled by Thomson Reuters expected the company to report earnings of $0.66 per share. Analysts' estimates typically exclude special items.
Quarterly operating revenues declined 20% to $3.4 billion from the previous year's $4.3 billion, and fell shy of ten Wall Street analysts' consensus revenue estimate of $3.55 billion.
Jim Young, Union Pacific chairman and chief executive officer, said, "We took decisive steps to reduce costs across our Company, while also making strong improvements in our safety performance, operating productivity and customer service."
Business volumes, as measured by total revenue carloads, decreased 21% from last year, pushing year-over-year freight revenues down 20% to $3.2 billion. Besides, a $306 million year-over-year reduction in first quarter 2009 impacted the freight revenues.
Revenue from Energy dropped 6%, while Agricultural revenue declined 13%. Chemicals revenues were down 15% and Industrial Products revenue decreased 29%. Further, Intermodal and Automotive revenues fell 22% and 55%, respectively.
Average fuel price plunged 47% to $1.51 per gallon from $2.84 per gallon in the first-quarter ending March 31, 2008. The company also reported a 6-point improvement in Customer Satisfaction Index to 87.
Future In Focus
Looking ahead, the company noted that it reduces costs across the board, strengthening its operations and offering competitive supply chain solutions to customers. "The difficult economic conditions continue to affect our business volumes," Young said.
Peer Performance
Among Union Pacific's rivals, Canadian National Railway Co. (CNI) posted an improved first-quarter earnings, helped by a gain on the sale of Weston subdivision. Owing to current economic conditions, transportation volumes dropped in almost all markets, resulting in overall 4% decline in revenues year-on-year. However, revenues as well as earnings topped Street expectations.
Montreal, Canada-based company's net income rose to C$424 million or C$0.90 per share from C$311 million or C$0.64 per share in the prior-year period. Quarterly revenues declined 4% to C$1.859 billion from C$1.927 billion in the previous year.
Another competitor, CSX Corp. (CSX) witnessed a downturn in its first-quarter profit, hit by lower volumes, as construction and consumer-related markets remained weak. However, the company's quarterly earnings, on a comparable basis, came in above the analysts' expectations, due to various productivity initiatives.
Jacksonville, Florida-based CSX reported first-quarter earnings of $246 million or $0.62 per share, down from $351 million or $0.85 per share in the prior year quarter. Revenues declined 17% to $2.25 billion from $2.71 billion the same quarter of the previous year.
Stock Movements
Union Pacific shares, which have been trading between $33.28 and $85.80 in the past 52 weeks, is currently trading at $49.45, up $1.73 or 3.63%.
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