The Coal Trader

Union Pacific beats Q4 profit estimates on strong pricing

Railroad operator Union Pacific (UNP.N), opens new tab beat estimates for fourth-quarter profit on Thursday on price hikes and volume gains. The company saw a year-on-year gain in freight volumes after a tough few quarters of muted freight demand and higher operating costs.

In response to these headwinds, the Omaha, Nebraska-based company has continued to price its services above inflation, mirroring a trend seen across sectors such as retail and industrials. Net income attributable to the company for the quarter was $2.71 per diluted share, up from $2.67 per share a year earlier and above analysts’ average estimate of $2.57 per share. However, pricing and volume strength were partially offset by reduced fuel surcharge revenue and an unfavorable business mix.

Operating revenue for the quarter was flat year-on-year at $6.16 billion but came in above analysts’ average estimate of $6.05 billion. The company, however, expects volumes to remain muted this year due to international intermodal business loss, lower coal demand, and softer economic conditions.

Union Pacific, which runs through 23 states west of Chicago and New Orleans, reported fourth-quarter operating ratio – a key metric that indicates operating expenses as a percentage of revenue – mostly flat at 60.9%.

The operating ratio had risen over the last four quarters before declining this quarter in a sign of improving efficiency for the company. The improvement comes after the company tapped veteran railroad executive Jim Vena to lead operations last July amid shareholder pressure to increase operational efficiency.

The company also reported improvements of 14% each in freight car velocity and locomotive productivity, for the second quarter in a row.

Shares of the company were flat in pre-market trading.