Union Pacific Corp.’s stock rose 0.5% before market open Thursday after the railroad reported first-quarter profit and revenue that beat Wall Street’s expectations.
Net income was $1.06 billion, or $2.67 a share, compared with $1.6 billion, or $2.57 a share, in the prior year’s quarter. The FactSet consensus for earnings per share was $2.57. Revenue rose 3% to $6.06 billion, above the FactSet consensus of $6.02 billion.
Union Pacific
UNP,
faced “a series of significant weather events” during the quarter, CEO Lance Fritz said in a statement. Despite the challenges, the rail carrier delivered greater network fluidity and resiliency in the quarter, he said.
“In addition to the impact of weather on carload volumes and costs, higher inflation also reduced our operating income and more than offset our record first quarter operating revenue,” he said in the statement. “Despite a continued challenging environment, our strengthening service product, bolstered by a strong pipeline of new employees, gives us confidence we can capture available demand and improve efficiency [in] the remainder of the year.”
The company’s operating expenses during the quarter were $3.76 billion, up from $3.48 billion in the same period last year, as compensation and benefits costs rose to $1.18 billion from $1.1 billion. Fuel costs rose to $766 million, compared with $714 million in the same period last year. Purchased services and materials rose to $653 million from $561 million.
Related: Derailments, paid sick leave loom over railroad earnings reports
Business volumes, as measured by total revenue carloads, were down 1% year over year.
Union Pacific executives cited the impact of Mother Nature during a conference call to discuss the results early Thursday. Eric Gehringer, Union Pacific’s executive vice president of operations, explained that Union Pacific crews in California had to battle flash flooding, while crews in the upper Midwest had to contend with blizzards and ice.
Speaking on the call, Fritz said that although the company had a more difficult start to the year than expected, Union Pacific hasn’t reduced its expectations for 2023. The company’s CFO, Jennifer Hamann, said that Union Pacific is maintaining its 2023 full-year guidance of carloads to exceed industrial production, operating ratio improvement, and pricing dollars in excess of inflation dollars.
With train derailments in the spotlight recently, Union Pacific executives also discussed the company’s efforts around rail safety. “We continue to make great strides in safety,” said Gehringer, pointing to the company’s installation of “state-of-the-art technology.”
Union Pacific, Gehringer said, has installed more 7,000 wayside detection devices.
