Union Pacific sees slow US growth continuing

AP News
Posted: Oct 21, 2010 4:58 PM
Union Pacific sees slow US growth continuing

The nation's largest railroad says the economy's on track to improve, but it's all uphill.

Union Pacific Corp. said Thursday that shipments of everything from cars to corn slowed from the first half of the year, but they're still getting better. The railroad is adding to those gains with higher prices, increased transfers from trucks and better efficiency.

That combination drove third-quarter earnings up 51 percent.

"Clearly the pace of the economy has slowed since the first half, but anything that's moving up looks good," CEO Jim Young said in an interview with The Associated Press.

Overall, the railroad shipped about 14 percent more carloads in the June-to-September period than it did a year ago. Union Pacific is hauling about 183,000 carloads a week now, compared with 130,000 per week at its worst point and 200,000 at its best.

Railroads are indicators of broader economic health because they carry so many everyday goods. The ability of Union Pacific and other railroads to pass on price increases to move those goods has allowed it to grow earnings faster than shipments improve. Railroads are able to raise prices because they're making their trains run more efficiently so goods get to their destination faster. They're also more fuel efficient than trucks; a single train can haul as much as 280 tractor-trailers.

Railroads are improving productivity by adding more cars to every train so they can carry more without using more employees to run them. Union Pacific is bringing back some employees it furloughed during the recession, but not all of them.

"We're hiring, but being cautious about it," Young said.

Young said the company remains focused on replacing 4,000 workers that are set to retire next year. The average railroad employee trains for about six months before starting work.

The Omaha, Neb., company earned $778 million, or $1.56 per share in the June-to-September period, compared with $514 million, or $1.01 per share, a year ago.

Revenue rose 20 percent to $4.41 billion. Fuel prices per gallon increased about 20 percent in the quarter.

Analysts polled by Thomson Reuters expected profit of $1.50 on revenue of $4.36 billion.

Shipping volume improved and it took in more money shipping agricultural, automotive and other products. Revenue from shipments of cars and car parts improved the most _ 36 percent _ as the auto industry recovered from a dismal 2009. Revenue from transfers between trucks and trains rose 34 percent.

Earlier this month CSX Corp. reported its third-quarter earnings soared 43 percent as its trains ran more efficiently and shipments rose. CSX, based in Jacksonville, Fla., is also making its trains longer to carry more freight without adding more employees.