Union Pacific beats quarterly profit estimates on strong coal shipments

A Union Pacific train travels through Union, Neb., July 31, 2018. (AP Photo/Nati Harnik, File)

Union Pacific, the largest U.S. freight railroad operator, beat second-quarter profit estimates on Thursday, powered by higher revenue from coal shipments and improved pricing.

Coal shipment volumes, a weak spot for U.S. railroad operators, have picked up after U.S. President Donald Trump signed executive orders aimed at boosting coal production.

Union Pacific, seen as a barometer for U.S. economic activity, also benefited from strong volumes in its grain products segments and industrial chemicals shipments.

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While the policy shift has provided a recent boost to rail carriers, the North American railroad industry has struggled with volatile freight volumes, rising labor and fuel costs and growing pressure from shippers over service reliability.

The West Coast rail giant has reportedly been in early-stage talks with its East Coast peer, Norfolk Southern, to explore a cross-continental railroad merger, possibly creating a single-line network stretching from coast to coast.

However, a merger with Norfolk would be subject to severe antitrust scrutiny from regulatory bodies such as Surface Transportation Board, which oversees railroads.

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Union Pacific’s quarterly profit rose to US$3.03 per share, beating analysts’ average estimate of US$2.91 per share, according to data compiled by LSEG.

Adjusted operating ratio, a key metric for measuring the operational efficiency of a railroad, rose by 230 basis points to 58.1 per cent from a year earlier.

Total operating revenue for the quarter ended June 30 came in at US$6.15 billion, compared with the average estimate of US$6.16 billion.

The company said operating revenue was driven by higher volume and “solid” core pricing gains.

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Reporting by Anshuman Tripathy in Bengaluru; Editing by Sriraj Kalluvila and Saumyadeb Chakrabarty