Eastern Railroad Discussion > Well, what CSX failed to do - UP did...in a big way.

Thursday, April 17, 2014

UP set four first-quarter financial records despite winter's adverse conditions

inShare. From: Progressive Railroading magazine.







Broad-based volume increases, core pricing gains and "reasonable" productivity improvements helped Union Pacific Corp. register record-setting financial performance in the first quarter despite an historically harsh winter, especially in the upper Midwest, senior executives said this morning during the Class I's earnings conference.

The Q1 records include diluted earnings at $2.38 per share, up 17 percent year over year; operating revenue at $5.6 billion, up 7 percent; operating income at $1.85 billion, up 14 percent; and the operating ratio at 67.1, down 2 points. In addition, freight revenue rose 6 percent to a first-quarter best $5.3 billion, and volume increased 5 percent to 2.3 million units.

UP leveraged the strengths of its diverse franchise in the face of challenging weather conditions, said Chairman and Chief Executive Officer Jack Koraleski.

"We're proud of the efforts of the men and women of Union Pacific, who worked tirelessly to serve our customers despite these weather challenges and helped us achieve such a solid start to the year," he said.

By business group:
• agricultural products revenue jumped 16 percent to $910 million and volume climbed 13 percent to 239,000 units as grain traffic soared 39 percent to 90,100 units;
• automotive revenue was flat at $488 million and volume ratcheted up 2 percent to 188,000 units as the severe winter impacted vehicle purchases in January and February;
• chemicals revenue rose 2 percent to $893 million and volume was flat at 270,000 units — crude-oil carloads fell 18 percent to 37,600 units due to more negative price spreads;
• coal revenue increased 3 percent to $961 million and volume rose 7 percent to 430,000 units as Colorado/Utah tonnage climbed 13 percent to 6.8 million;
• industrial products revenue jumped 10 percent to $1 billion and volume rose 9 percent to 314,000 units as frac sand carloads climbed 22 percent; and
• intermodal revenue increased 4 percent to $1 billion and volume increased 3 percent to 833,000 units as domestic traffic climbed 8 percent to 394,900 units.

UP's first-quarter operating expenses increased 3 percent to $3.8 billion, including $35 million in costs associated with the harsh winter. The Class I dealt with congestion in Chicago, which experienced a record number of days with temperatures at or below zero and the city's third-most snowfall, said President and Chief Operating Officer Lance Fritz. In addition, Minneapolis registered its fifth-most number of days with temperatures at or below zero and an above-average snowfall.

The adverse weather conditions caused UP's velocity to fall from 26.4 mph in first-quarter 2013 to 24.5 mph, and freight-car dwell time to rise from 27.4 hours a year ago to 30.7 hours, said Fritz. To counteract the conditions, the railroad limited train sizes, realigned resources, chose alternate switching locations and made other operational moves, he said.

For the remainder of 2014, senior execs plan to watch the weather and economy closely to "see how it plays out," said Koraleski. The Class I anticipates positive volume growth, assuming continued economic strengthening, more core pricing gains and additional network efficiencies.

"There's still a lot of year ahead of us, but we are seeing signs of gradual economic improvement, and we're encouraged by the opportunities it presents," said Koraleski.

Longer term, UP expects to achieve a sub-65 annual operating ratio before 2017

I didnt read any of that cause I can tell you this, its like comparing apples and oranges, CSX runs the East coast where we got slammed this winter with cold and snow, UP, the West coast where its predominantly warmer

Posted from Android



Edited 1 time(s). Last edit at 04/17/14 08:31 by ChiHeritage.

CSX is also still feeling the effects of the huge drop in demand for Central App coal and I would agree that the entire east had a much more difficult winter than say the more weather challenged areas on UP such as Wyoming and the sierras...this winter was unlike anything the eastern US has seen in the last 20 years...

Posted from iPhone

ChiHeritage Wrote:
-------------------------------------------------------
> I didnt read any of that cause I can tell you
> this, its like comparing apples and oranges, CSX
> runs the East coast where we got slammed this
> winter with cold and snow, UP, the West coast
> where its predominantly warmer
>
> Posted from Android


also most of the Mid-Atlantic region from Boston to Virginia that CSX services is a terminating point for goods and products whereas most of the west coast that UP services is an originating point for goods and services ... originating shipments pay a lot more that terminating shipments due to home rail car utilization and per-diem paymentss

The UP realignment of resources may also have something to do with the complaints of grain shippers, among other groups. If your trains move slower, and spend more dwell time in the yards, and have fewer cars on them, some freight will be left behind.

Grain, which moves in peaks requiring immediate attention, is a perfect example.

Overall, you have to make choices, and it looks like UP made the right ones.

ChiHeritage Wrote:
-------------------------------------------------------
> I didnt read any of that cause I can tell you
> this, its like comparing apples and oranges, CSX
> runs the East coast where we got slammed this
> winter with cold and snow, UP, the West coast
> where its predominantly warmer
>
> Posted from Android


also most of the Mid-Atlantic region from Boston to Virginia that CSX services is a terminating point for goods and products whereas most of the west coast that UP services is an originating point for goods and services ... originating shipments pay a lot more that terminating shipments due to home rail car utilization and per-diem paymentss

Out_Of_Service Wrote:
-------------------------------------------------------
> ChiHeritage Wrote:
> --------------------------------------------------
> -----
> > I didnt read any of that cause I can tell you
> > this, its like comparing apples and oranges,
> CSX
> > runs the East coast where we got slammed this
> > winter with cold and snow, UP, the West coast
> > where its predominantly warmer
> >
> > Posted from Android
>
>
> also most of the Mid-Atlantic region from Boston
> to Virginia that CSX services is a terminating
> point for goods and products whereas most of the
> west coast that UP services is an originating
> point for goods and services ... originating
> shipments pay a lot more that terminating
> shipments due to home rail car utilization and
> per-diem paymentss

This is actually less of an issue today with all the private cars running around out there.

You also have to remember csx is still paying big money to clean up the site of the thanksgiving day derailment in willard, oh. Up around 100 million I'm sure that's hurt the bottom line.

Posted from Android

CSX still made money the first quarter. Who cares what the stock market know it alls have to say.

Posted from iPhone

UP has incredible market exposure and long routes since it combined with CNW and SP. CSXT actually gets many long, heavy trains out of UP yards at Little Rock and North Platte.

CSX has great routes, and has done some fine projects, but it needs more power, many signal and track upgrades, and less RCO mania. If so, the freight would move faster and more reliably, and time is money.

UP has a lot of room to grow on its own rails alone, as it connects so many diverse parts of the country, including the Iron Range, the PNW, Gulf Coast, Midwest, California, the Rockies, oil fields, Mexico...everywhere west (sorry, Burlington). UP grew during the recession because all the new routes it got in the 1990's are still generating new business. When the tariffs were split between carriers, there was less incentive to market the railroad. Now that the economy is growing, UP will probably be choked with business once again, particularly loose car, merchandise traffic.

UP is also a major beneficiary of the boom in chemical traffic. Chemicals in turn are benefiting from the cheap natural gas, and natural gas liquids. Both provide feedstocks for chemical products.

Some of these routes are former SP, and I've often wondered what wold have happened if SP hung in long enough to see the boom in natural gas, Permian etc basin oil, and chemicals.