OMAHA, Neb. (AP) — Union Pacific’s fourth-quarter profit crept up 1% as the railroad delivered more fertilizer, imported goods and chemicals.
The Omaha, Nebraska-based railroad said it earned $1.65 billion, or $2.71 per share, in the quarter. That’s up slightly from $1.64 billion, or $2.67 per share, a year earlier.
The results topped the estimates of the analysts surveyed by FactSet Research that called for earnings of $2.60 per share as Union Pacific hauled 3% more shipments.
CEO Jim Vena said the railroad’s key operating metrics improved in the fourth quarter with average freight car velocity jumping 14% to 217 daily miles per car, and the average maximum length of Union Pacific’s trains increased 2% to 9,413 feet. The average speed of the railroad’s trains also increased 5% to 24.9 mph.
“We enter 2024 with strong momentum, recognizing we have plenty of opportunity to improve. We’re excited to show our stakeholders what our great team can accomplish,” Vena said.
Union Pacific said it’s unclear how much volume will grow because of the “muted” economic outlook this year and uncertainty about interest rates. The railroad also lost a contract to haul some imported goods and it expects weaker coal demand.
“It’s very difficult for us to, look forward and say, this is exactly the way the year is going to go. More important to me and the team is what’ve we done operationally,” Vena said.
No single factor explains the improvement in Union Pacific’s operations. Rather, Vena said the railroad is trying to tweak everything and change the culture to reliably speed up when freight cars are picked up, how fast they move between points and how quickly they can be switched between trains in a railyard. Doing all that will improve the service customers get.
“Truly, that’s the way it is, is fine tuning the operation to be able to be more efficient in how you operate the trains,” Vena told The Associated Press.
The railroad’s revenue slipped slightly to $6.16 billion as fuel surcharge revenue declined with lower diesel prices and the mix of shipments shifted to a less-profitable mix of cargo and revenue per car declined 3%. But Union Pacific’s topped Wall Street’s predictions for $6.05 billion. revenue.
Union Pacific was able to keep its expenses flat during the quarter at $3.75 billion as it laid off a couple hundred managers and more than 1,000 seasonal track maintenance workers as it delayed some capital projects at end of the year.
Edward Jones analyst Jeff Windau said Union Pacific had a good quarter of improving efficiency, which should continue under Vena who was brought in last summer after a hedge fund pressured the railroad to improve its bottom line performance. Vena is known for the lean operating model he favors that has become the industry standard in recent years.
“With Jim Vena being in charge now, we’re looking for continued momentum in efficiencies for the railroad,” Windau said.
The railroad said it plans to invest $3.4 billion in improvements to its network and equipment this year — down from $3.7 billion last year, but investors may be disappointed that Union Pacific doesn’t plan any share repurchases during the first quarter.
Union Pacific is one of the nation’s largest railroads and operates more than 30,000 miles of track in 23 western states.
Railroad safety has been a concern ever since a Norfolk Southern train derailed last February, spilled hazardous chemicals and caught fire in eastern Ohio. Members of Congress proposed reforms but those have largely stalled.
Vena said it’s clear when he looks at the numbers over the past decade that safety is improving at UP and the other huge freight railroads because the number of major derailments and other incidents is down over time.
“We operate millions of miles of trains and operations and handle cars. And the amount of incidents we have is actually a very, very small subset. And most incidents that we have are very minor. But still they’re an incident and you have to learn from them,” Vena said.
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