Union Pacific's First Quarter Profit Climbs Nearly 8 Percent

Union Pacific's UNP first quarter net profit rose nearly 8 percent despite lower revenue.

First quarter 2019 net income increased 7.7 percent to $1.4 billion, or $1.93 per diluted share, compared with $1.3 billion, or $1.68 per diluted share in the first quarter of 2018.

Meanwhile, revenue in the first quarter of 2019 fell 2 percent to $5.4 billion as freight revenues also declined by 2 percent. UNP attributed the freight revenue decline to lower volumes for energy and agricultural products, which were partially offset by higher volumes for industrial and premium products. An increased fuel surcharge also contributed to lower freight revenue in the first quarter.

The company's operating ratio in the first quarter of 2019 was 63.6 percent, which UNP said was a 1 percent improvement from the first quarter of 2018. Freight car velocity also improved 7 percent to 185 daily miles per car.

Average train speed and terminal dwell time also fell in the first quarter of this year compared with the first quarter of 2018. Average train speed was down to 23.3 miles per hour, compared with a better speed of 24.8 miles per hour in the first quarter of 2018. However, terminal dwell time (the amount of time a railcar is idle in a railyard) was down significantly, averaging 26.6 hours, compared with 33 hours in the first quarter of 2018.

The lower operating ratio comes as UNP began transitioning to precision scheduled railroading (PSR) last year. PSR is an operating tool in which railroads schedule railcars on a fixed schedule regardless of how full the carloads are. UNP is one of four Class I railroads that has adopted the model in recent years.

UNP officials attributed PSR as helping the railroad recover from record flooding that occurred in the Midwest in March. UNP is still experiencing delays as repairs are still underway on rail lines in Iowa, Kansas and Nebraska, and the company has said it is currently watching water levels around St. Paul, Minnesota. Information on the latest service updates can be found here.

"We delivered record first quarter financial results driven by improved operating performance, while dealing with significant weather challenges," said UNP president and chief executive officer Lance Fritz. UNP's operating plan, which incorporates PSR principles, "created a more resilient and robust network, allowing us to quickly return to normal operations."

Image sourced from Pixabay

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