OMAHA, Neb. — Union Pacific today lowered its volume outlook for the year as soft demand across its bulk, industrial, and premium business segments led to lower second quarter revenue and profits.
As recently as June, UP expected its volume this year to exceed the level of industrial production, which at the time was forecast to be negative 0.7%. But now UP says volume this year likely will be below the forecast rate of industrial production growth of 0.1%.
The railroad also withdrew its operating ratio guidance and says the key metric is likely to rise this year due to inflation, lower volume, and labor expenses. UP also will pause share repurchases for the remainder of the year.
For the quarter, UP’s operating income declined 12%, to $2.2 billion, as revenue fell 5%, to $6 billion. Earnings per share decreased 12%, to $2.57. The operating ratio rose 2.8 points to 63%.
Overall traffic volume was down 2% for the quarter. Industrial products volume increased 1%, bulk declined 1%, and premium business — which includes intermodal and automotive — declined 4%. Automotive traffic was up 11% thanks to increased production, but intermodal volume was off by 7% as imports fell and consumers continued to shift their spending toward services rather than goods.
“It’s hard to say when the economy will begin to recover in certain sectors, but our diverse portfolio allows us to see positive momentum in many of our commodities,” says Kenny Rocker, UP’s executive vice president of marketing and sales. “The team remains focused on winning new business and has a strong pipeline of opportunities with a great track record for closing deals.
UP has a positive outlook for automotive, biofuels, and construction-related commodities such as aggregates.
The railroad’s operations improved during the quarter as train crew employment levels increased and the network became more fluid, with average train speed up and terminal dwell down. Freight car velocity, measured by car miles per day, rose 8% to 202 miles.
“The bottom line is the actions we’ve taken to strengthen our crew resources are improving the railroad,” CEO Lance Fritz says.
Intermodal trip plan compliance rose to 79% from 62% a year ago and from 72% in the first quarter. Manifest and auto trip plan compliance was 64%, an 8-point improvement versus last year and a 3-point improvement over the first quarter.
UP said its safety performance improved during the first half of the year, with derailments down 9% and personal injuries down by 4%. The railroad did not release separate figures for the second quarter.
Wisely taken decision from a wise and consummate freight railroad goliath!
Dr. Güntürk Üstün