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Union Pacific cost cuts offset declining shipments in 4Q

Photo: AP.

January 19, 2017 07:04 PM

OMAHA, Neb. (AP) — Union Pacific's fourth-quarter profit grew 2 percent as the railroad cut costs to offset a 3 percent decline in shipments.

Net income reached $1.14 billion, or $1.39 per share, well above the per-share earnings of $1.34 that Wall Street was looking for, according to a survey by the data company Zacks Investment Research.

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Revenue declined 1 percent to $5.17 billion, but that was also better than the $5.14 billion analysts expected.

The railroad reduced its expenses 3 percent to $3.2 billion in the quarter in response to the slower shipping volume.

Union Pacific Chairman and CEO Lance Fritz said higher energy prices, favorable agricultural markets and improving consumer confidence all suggest railroad shipping volumes will grow this year.

"We are fairly optimistic about some of the macroeconomic indicators that drive our core business," he said.

Edward Jones analyst Dan Sherman said Union Pacific should be well positioned to profit when volumes do improve because the railroad has done so much to cut costs.

Fritz said potential changes from President-elect Donald Trump on tax reform, infrastructure investment and regulation could boost the economy, but hopes that he doesn't enact unnecessary trade barriers.

About 12 percent of Union Pacific's carloads either come from or go to Mexico. And all railroads benefit from international trade because they haul containers of goods that ships bring into port hundreds or thousands of miles inland before trucks carry them to their destinations.

"I think our economy is inextricably linked to other global economies," Fritz said. "And I think any administration is best served in recognizing that as they look for ways to modernize trade agreements and open up markets to the U.S."

Shares rose $2.47, or 2.4 percent, to $106.24 Thursday. Almost all shares in the railroad sector rose after reports of an activist investor targeting rival CSX railroad.

Fritz said Union Pacific plans to spend $3.1 billion on capital projects and equipment this year. That would be down from the $3.5 billion spent last year as the railroad delays some planned locomotive purchases.

Union Pacific Corp., based in Omaha, Nebraska, operates 32,400 miles of track in 23 states.

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Elements of this story were generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on UNP at https://www.zacks.com/ap/UNP

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Keywords: Union Pacific, Earnings Report, Priority Earnings

Credits

By JOSH FUNK

(Copyright 2017 by The Associated Press. All Rights Reserved.)

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