Union Pacific, which this year celebrates its 150th anniversary, is the first of the major U.S. railways to report quarterly results.
Union Pacific Corp., the No. 1 U.S. publicly held railway, reported above-forecast quarterly results driven by higher volume and pricing, and forecast record profit in 2012 on slow but steady economic growth.
Core pricing rose 5 per cent as automotive, chemical, energy and industrial products helped push total revenue carloads up 3 per cent in the fourth quarter from a year ago. Freight revenue rose in all six of the company's business segments.
"We expect continued slow but steady economic growth in 2012," chief executive officer Jim Young said in a statement Thursday.
The company's shares, which have shot up more than 45 per cent from lows set in October, were up 3.7 per cent in late morning trade on the New York Stock Exchange.
The Dow Jones Transportation average was up less than half that amount.
Union Pacific plans to spend a record $3.6-billion (U.S.) this year, topping $3.2-billion in 2011, to replace aging equipment, put in more track and other infrastructure updates to improve productivity and safety and to meet expected volume growth, executives told analysts on a conference call.
They also said the company competed for and won about 90 per cent of around $1 billion in legacy, or older contracts, that it renegotiated at higher prices, which will underpin profit this year.
"We've seen not only record earnings but repricing of legacy contracts and core pricing going up 5 per cent despite a weak economy," said Josh Duitz, co-portfolio manager at Alpine Global Infrastructure Fund in Purchase, N.Y.
"Their outlook certainly isn't for a strong economy and they still project record earnings going further and there's a lot of upside if the economy improves more than expected," he said. The fund owns Union Pacific shares and would look at buying more on pullbacks, he added.
Revenue rose by double digits in all but the agricultural sector, with the five other groups posting increases between 13 per cent for intermodal shipments to 26 per cent for auto-related shipments in the quarter.
Intermodal refers to the shipment of goods in containers that can be moved from one form of transportation to another, such as from train to truck or from train to ship.
"The volume outlook is pretty well known and planned for, but it's the way they are able to flow that to the bottom line without adding costs," as slow economic growth curbs volume gains, said Kevin Kirkeby, S&P Capital IQ analyst. "
The Omaha, Neb.-based company reported that net income rose to $964-million, or $1.99 per share, in the fourth quarter from $775 million, or $1.56, a year before.
Analysts on average expected a per-share profit of $1.82, according to Thomson Reuters I/B/E/S.
Quarterly operating revenue rose 16 per cent to a record $5.1-billion from $4.4-billion. Analysts forecast $5.06-billion.
Earnings rose to $6.72 per share for the full year 2011 from $5.53 in 2010, topping analyst forecasts for $6.55. The view for 2012 is $7.88, according to Thomson Reuters I/B/E/S.
Union Pacific, which this year celebrates its 150th anniversary, is the first of the major U.S. railways to report quarterly results.
Norfolk Southern Corp., CSX Corp. and Kansas City Southern report next week.
U.S. railways overall originated 15.2 million carloads in 2011, up 2.2 per cent from 2010 and up 9.7 per cent from 2009, according to the Association of American Railroads.
Metallic ores and primary metal products had the biggest carload increases in 2011, while grain shipments had the biggest decline, the industry group said.