Union Pacific earnings rise 14%

Union Pacific Corp., the nation´s largest railroad operator, said Thursday its third-quarter earnings rose 14 percent on brisk demand from shippers and more efficient operation of its rail system.

Its profit increased to $420 million, or $1.54 per share, in the July-September period from $369 million, or $1.38 per share, during the same period last year. Analysts polled by Thomson Financial forecast a profit of $1.47 per share.

The year-ago results benefited from a tax savings equal to 44 cents per share, but damage from the hurricanes that hit the Gulf Coast and Florida weighed down last year´s results.

Its third-quarter results this year were helped by a $23 million insurance settlement from the January 2005 West Coast storms.

Revenue in the period grew 15 percent to $3.98 billion from $3.46 billion, driven by double-digit growth in most of the railroad´s businesses. Analysts´ forecasts called for revenue of $4 billion.

Merrill Lynch analyst Ken Hoexter wrote in a research note that price increases in Union Pacific´s agricultural, energy and industrial segments drove the quarter´s revenue growth. And he said Union Pacific continues to work on costs.

Union Pacific said third-quarter carload volume grew 3 percent over last year as the railroad neared its peak season, but remained relatively flat compared to this year´s second quarter.

Chief Executive Jim Young said the lower volume was caused by lower-than-expected coal volume and a 4 percent drop in the railroad´s industrial products sector, which includes building materials for the slowing housing market.

Citigroup analyst John Kartsonas said in a research note that he had expected a 4.1 percent increase in overall shipping volume, but revenues were close to what he expected.

We believe that the company is on the right track, Kartsonas wrote.

Union Pacific´s shares fell 2 percent in morning trading on the New York Stock Exchange before rebounding to close at $91.35, up 5 cents.

Kartsonas predicted some weakness in the stock because of its recent performance. In the last few weeks, the stock had been climbing closer to the 52-week high of $97.49 that was set in April. It dipped below $80 a share in August and September.

Strong demand has contributed to solid profits at Union Pacific this year, and the railroad has been working to become more efficient and reliable. Through the first three quarters, Union Pacific´s net income soared 54 percent over last year, to $1.12 billion on $11.62 billion in revenue.

Young said the railroad has been improving efficiency every quarter. And during the third quarter, the railroad reduced the amount of time trains spend sitting in rail yards and other terminals by 7 percent, to 26.2 hours on average. That dwell time figure is a key measure of operating efficiency.

We still have a long way to go, Young said. Our key here is handling record volume more efficiently.

Union Pacific has also benefited from better weather and fewer track problems this year. In 2005, the company was hurt by severe West Coast storms in January, derailments in Wyoming in May, hurricanes Katrina and Rita in August and September and flooding in Kansas in October.

Mother Nature´s treated us well this year, Young said.

The railroad said commodity revenue was again up from last year in all the major categories of its business. Agricultural revenue was up 19 percent, energy revenue was up 17 percent, industrial products revenue was up 15 percent, chemicals and intermodal revenue were both up 14 percent and automotive revenue was up 10 percent.

The peak season for railroads typically starts near the end of the third quarter in September, as products for the upcoming holiday season begin arriving at ports.

The company increased its earnings prediction for the full year Thursday to between $5.63 and $5.73, with commodity reve

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Fonte: Houston Chronicle (EUA)

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