Union Pacific Profit Falls on Weak Freight Demand
22 4월 2016 - 2:29AM
Dow Jones News
By Anne Steele
Union Pacific Corp. Thursday reported a 15% drop in quarterly
profit due to weak freight demand, especially for coal and forecast
total volumes to be down this year.
The company's performance was hurt by big declines in
energy-related businesses, particularly coal, and oil and natural
gas shale fracking sand, which shrunk 34% and 49%, respectively in
the quarter. Industrial products were down 10%.
Even so, Chief Executive Lance Fritz pointed to several bright
spots in the U.S. economy such as healthy growth in industrial
chemicals and improving signs for construction, including more rock
and lumber shipments.
"Our book of business does indicate that the economy continues
to recover and grow, even though it's at a relatively slow rate,"
Mr. Fritz said in an interview. While housing starts are still at
historically low numbers, he said the business is
strengthening.
Shares of Union Pacific rose 5.6% in recent trading to $88.50,
and are up 13% so far this year.
Union Pacific said it expects total volumes for the year to
decline in the mid single digits.
As major transportation providers for cargoes representing all
facets of the U.S. economy, railroads have traditionally been seen
as an economic bellwether.
While low energy prices have caused Union Pacific's oil and
natural gas shale fracking business to skid, Mr. Fritz says that he
does expect a recovery -- and at lower oil prices than was
previously possible for domestic production. Union Pacific's
biggest piece of that business is shipping sand, pipes and steel
for drilling wells.
Shale drilling peaked about a year and a half ago with about
2,000 active drilling rigs, Mr. Fritz said, a number that has
plunged beneath 500 currently.
"I don't know if you get back to that kind of peak," Mr. Fritz
said. But "producers have really knocked down their operating cost,
so I think that strike price is lower than it was four years
ago."
Overall, revenue in the quarter decreased 14% to $4.83 billion
and profit fell to $979 million from $1.15 billion.
For the three months ended March 31, Union Pacific's total
freight volume skidded 14% as declines across sectors more than
offset growth in automotive, which rose 7%.
Anne Steele contributed to this article
Write to Laura Stevens at laura.stevens@wsj.com
(END) Dow Jones Newswires
April 21, 2016 13:14 ET (17:14 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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