This story originally appeared on Trains.com.
OMAHA, Neb. – Union Pacific’s profits rose in the second quarter despite a sharp drop in coal traffic.
“When you remove coal, our total volume was up 3% in the second quarter. This demonstrates that even in a tough freight environment, we are winning with our customers to bring new business to the railroad,” CEO Jim Vena said on the company’s earnings call on Thursday morning.
Quarterly operating income increased 9%, to $2.4 billion, as revenue grew 1%, to $6 billion. Earnings per share rose 7%, to $2.74. UP’s operating ratio improved 3 points, to 60%.
“Despite a challenging environment, we achieved strong financial results in the quarter,” Vena says. “We continue to drive efficiency into the network, and the commercial team has done a good job generating price for the value we provide our customers.”
Overall, UP’s volume for the quarter was flat compared to a year ago. Bulk traffic declined 5%, due to a 23% drop on coal traffic as natural gas prices remained low and utility coal stockpiles remained elevated. Industrial products volume declined 3%. Premium traffic – which includes intermodal and automotive – was up 6% due to a combination of international and domestic intermodal growth and landing new auto contracts from Volkswagen and General Motors.
UP slightly downgraded its outlook for the rest of the year. The railroad now said its volume expectations are uncertain based on economic indicators and weak coal demand. Previously UP expected muted traffic volumes this year.
The railroad’s key operational metrics held steady despite the impact of flooding in both its southern and northern regions.
“Our service was challenged in the quarter, but I’m pleased with our ability to recover,” Vena says.
Freight car velocity was flat at 201 car miles per day. The manifest and automotive service performance index was flat at 84%. But the intermodal service performance index rose 4 points to 93%.
UP’s locomotive and workforce productivity metrics improved for the quarter. UP set an average train length record for the quarter, at 9,544 feet, which included a highest ever monthly figure above 9,600 feet in June, says Eric Gehringer, executive vice president of operations.
Gehringer praised UP’s maintenance of way teams for quickly rebuilding flooded track, repairing bridges, and clearing trees in the wake of storms that hit the railroad this spring.
“Operating outdoors these past three months has not been easy,” Vena says.
The railroad’s derailment and personal injury rates both improved during the quarter, but UP did not provide specifics.
Union Pacific’s earnings presentation is available online.
https://investor.unionpacific.com/static-files/666cca98-8779-48df-8e53-adc443e1a7ae
The post Declining coal volumes can’t sink Union Pacific’s second quarter results appeared first on FreightWaves.
