Union Pacific Revenue Disappoints After Pricey Winter Storms

(Bloomberg) — Union Pacific Corp. reported revenue beneath analysts estimates as disruptions from winter storms drove up prices, even because the railroad hauled extra items from a yr earlier and charged extra per carload.

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Earnings for the fourth quarter, buoyed by inventory buybacks, had been $2.67 a share, the Omaha, Nebraska-based railroad mentioned Tuesday in an announcement. Analysts had anticipated $2.79 on common, in line with estimates compiled by Bloomberg. Income climbed 8% to $6.18 billion, narrowly lacking analysts’ expectations.

“Income progress was greater than offset by elevated working bills from operational inefficiencies and a better inflationary setting,” Chief Govt Officer Lance Fritz mentioned within the assertion.

Union Pacific powered by way of storms that flooded California and dumped snow in northern states, boosting carloads at the same time as trains had been delayed. Automotive and containerized shipments rebounded after having dropped in 2021’s fourth quarter and carloads of sand and gravel additionally rose. Carloads grew 0.8%.

Shares fell 2.8% at 9:52 a.m. in New York after a short halt on the open of buying and selling. Union Pacific edged up 1.5% this yr by way of Monday after dropping 18% final yr.

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Whereas per-share earnings rose by a penny from a yr earlier, internet revenue was $1.64 billion, a 4.3% lower.

Working prices jumped 14% from a yr earlier on increased gas and bought providers and supplies. Income per carload elevated 8% on the again on value will increase and better actions of products, similar to vehicles, that value shippers extra to move. Traders will likely be watching to see if railroads can elevate costs this yr as demand weakens and truck charges fall.

Volumes grew at the same time as some shippers diverted cargo from rails on the specter of a nationwide rail strike throughout contract renewal negotiations. A strike was averted in early December when Congress compelled the unions to just accept phrases brokered by the White Home in September.

Union Pacific expects carload this yr to develop sooner than US industrial manufacturing, which now’s forecast to contract by 0.5%, the corporate mentioned in a slide presentation. The railroad mentioned it expects to maintain pricing forward of its inflation. Capital expenditures in 2023 are forecast at $3.6 billion.

Union Pacific has taken intermodal market share from Warren Buffett’s BNSF Railway Co. after successful a contract with trucker Knight-Swift Transportation Holdings Inc. that started final yr. Union Pacific additionally picked up a contract for the intermodal enterprise of Schneider Nationwide Inc., which can begin this yr.

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Working revenue margin fell to 39% from about 43% a yr earlier because the climate disruptions drove up prices. Union Pacific might face rising bills this yr because the railroad seeks to enhance service after catching warmth from the rail regulator over fixed community congestion that resulted in Union Pacific limiting deliveries to some prospects.

The railroad spent $9.4 billion on dividends and share repurchases final yr, a bit shy of the $10.1 billion it returned to shareholders in 2021.

(Updates shares.)

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