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Union Pacific 3Q profit rises on higher prices

Union Pacific 3Q profit rises on higher prices

October 21st, 2011 by SAMANTHA BOMKAMP, AP Transportation Writer in News

NEW YORK (AP) - Union Pacific Corp. on Thursday reported that its third-quarter earnings rose 16 percent, as the railroad charged higher prices to offset slower growth in shipments and higher fuel costs.

The nation's largest railroad also said it expects its business to continue to grow despite an uncertain view for the broader U.S. economy.

Shares rose 4 percent Thursday, rising $3.63 to close at $94.59.

The Omaha, Neb., company earned $904 million, or $1.85 per share between June and September. That's up from $778 million, or $1.56 per share, a year ago.

Revenue rose 16 percent to $5.1 billion. Fuel prices jumped 42 percent in the three-month period, while total operating expenses rose 17 percent. Severe heat and extended drought in Texas damaged large stretches of track during the summer.

According to FactSet, analysts expected profit of $1.81 per share on revenue of $5.03 billion.

Shipping volume grew 1 percent in the period. The amount of cars and parts moved on its lines grew the most of any category, with volume up 10 percent. Shipments of agricultural products and intermodal goods fell.

Intermodal shipments are those transferred between trains and another method of transportation, like trucks or ships. Those shipments are mostly made up of consumer products, so they're affected by swings in buying habits. Agricultural product shipments include whole grain, grain products, food and other refrigerated items.

Volume in the company's biggest segment, energy, rose 7 percent. That unit includes everything from coal to wind turbines. Revenue in that segment jumped 24 percent.

Revenue increased in Union Pacific's five other shipping categories, too, as the railroad charged more for its services. Higher shipping prices can trickle down to consumers because transportation costs are among the largest expenses for retailers. Railroads carry many goods consumers rely on every day, including coal for electricity, food and a variety of goods shipped in from overseas like televisions and other electronics.

Union Pacific's results echoed those of eastern railroad CSX Corp. On Tuesday CSX said third-quarter earnings rose 12 percent, helped by higher prices. Revenue grew 11 percent to $2.96 billion.