Union Pacific posted second-quarter profit above Wall Street estimates on Thursday, as higher freight rates and strong demand overshadowed an increase in operating costs.
U.S. railroads have capitalized on pricing strength and operational discipline, while efforts to improve network reliability and on-time performance have helped support freight volumes and attract new business.
However, elevated fuel costs remain a key challenge for transportation companies after U.S.-Israeli strikes on Iran sent energy prices sharply higher, squeezing margins across sectors from trucking and logistics to airlines in one of the biggest disruptions since the COVID-19 pandemic.
U.S. average gasoline prices rose above $4 a gallon in March for the first time in more than three years, capping the sharpest monthly increase in decades, and currently remain around the $4-per-gallon mark.
Union Pacific’s total operating expenses rose 13 per cent to $4.1 billion in the second quarter ended June 30, driven by a 63 per cent surge in fuel expenses to $938 million.
The earnings report comes a day after the U.S. Surface Transportation Board ordered Union Pacific and Norfolk Southern to make public employee-impact data in their proposed merger application, siding with labor unions that had sought disclosure of the information.
Union Pacific is pursuing an $85 billion acquisition of Norfolk Southern NSC.N, a transaction that would create the first coast-to-coast U.S. freight railroad operator.
The U.S. Surface Transportation Board in May paused its review of the companies’ revised merger application and requested additional information related to competition and the transaction’s impact on customers and rival railroads.
The companies’ merger application has been accepted by the Surface Transportation Board, although the agency has put subsequent proceedings, including an environmental review, on hold. The STB has exclusive jurisdiction over reviewing and approving railroad merger transactions.
The West Coast railroad operator reported adjusted earnings of $3.41 per share for the second quarter, topping analysts’ average estimate of $3.24 per share, according to LSEG data.
Union Pacific’s revenue jumped 12 per cent to $6.86 billion from a year earlier. Analysts’ expectation came in at $6.71 billion.
Its freight revenue also rose 12 per cent to $6.52 billion in the quarter.
Shares of the company were up 2 per cent in premarket trading.
(Reporting by Apratim Sarkar in Bengaluru; Editing by Shinjini Ganguli)
