Railroad operator Union Pacific Corp. (UNP) reported Thursday a significant rise in profit for the second quarter, reflecting a 27% rise in freight revenues mainly on double-digit volume growth. The Omaha, Nebraska-based company's top line beat market estimates.
Net income for the second quarter increased to $711 million from $465 million last year, and earnings per share climbed 52% to $1.40 from $0.92 a year ago.
On average, 26 analysts polled by Thomson Reuters expected earnings of $1.21 per share for the quarter. Analysts' estimate typically excludes one-time items.
Operating revenue of the transportation company grew 27% in the second quarter to $4.18 billion from $3.30 billion in the second quarter of 2009, beating twenty analysts' consensus estimate of $4.08 billion.
In the first quarter of fiscal 2010, Union Pacific reported net income of $516 million or $1.01 per share and total operating revenues of $3.97 billion.
Freight revenues for the second quarter climbed 27% to $3.96 billion from $3.12 billion a year ago, driven by double-digit volume growth, increased fuel cost recoveries and core pricing gains. In the segment, revenues from Automotive grew 105%, Intermodal went up 35%, Industrial Products grew 30%, and Chemicals revenues climbed 19%. The company also recorded a 17% rise in Energy revenues and 13% increase in Agricultural revenues.
The company noted that second-quarter business volumes, as measured by total revenue carloads, grew 18% to 2.18 million from prior year's recession-impacted levels of 1.85 million. The company said this is the first time in six years that all six Union Pacific business groups reported volume growth in the same quarter. Average revenue per car rose 8% to $1,815 from $1,685 a year earlier.
Commenting on the results, Jim Young, chairman and chief executive officer of the company, said, "Beyond strong earnings growth, the real highlight was achieving a 69.4 percent operating ratio - our first sub-70 quarterly mark. We demonstrated great volume leverage, efficiently handling an 18 percent increase in carloadings at modest incremental cost."
Union Pacific's peer CSX Corp. (CSX) last week reported that its second-quarter profit increased 36% over last year to $414 million or $1.07 per share, driven by strong volume and revenue growth combined with lower operating expenses. Second-quarter revenue increased 22% to $2.66 billion from $2.19 billion in the same quarter last year.
For the first six months of fiscal 2010, Union Pacific's net income climbed 48% to $1.23 billion or $2.42 per share from $827 million or $1.64 per share a year earlier. Total first-half operating revenues grew 21% to $8.15 billion from $6.72 billion last year.
Looking ahead, Young said, "While the pace and direction of the economic recovery is uncertain, we expect and are prepared to handle continued volume growth on our network, both in 2010 and beyond. As carloadings increase, we are focused on meeting the increased expectations of customers and shareholders to move new and existing business safely, efficiently and more profitably."
In a June 25 research note, brokerage firm FBR Capital Markets reiterated its rating on Union Pacific at 'Outperform', with $88 price target.
UNP is currently trading at $71.74, up $2.61 or 3.78%, on a volume of 347 thousand shares.
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