Thursday, January 19, 2012

Union Pacific reports strong revenue gains for 2011

Union Pacific, the 150 year old railroad, kicked off the earnings season by reporting strong earnings for both Q4 2011 and for 2011. Q4 2011 increased 16% to $5.1bn while 2011 revenue increased 15% to 19.6bn. So far, the company has recorded 5 consecutive quarters of double-digit growth.

2011 Revenue growth was noted in all 6 business groups:

Agricultural: $3.3bn, +10%
Automotive: $1.5bn, +19%
Chemicals: $2.8bn, +16%
Energy: $4.1bn, +17%
Industrial Products: $3.2bn, +20%
Intermodal: $3.6bn, +12%

2011 volume growth was recorded in 5 of the 6 business groups. The strongest growth was in the Chemicals group which benefited from a 46% increase in petroleum shipping. The intermodal group was the only one to report a decline. International intermodal growth was soft due to lack of demand for imported goods. However, domestic intermodal grew and is expected to continue into 2012 as the railroad takes share from trucks.

Union Pacific also reported they plan to spend a record $3.6bn in 2012 to replace aging equipment and update infrastructure in anticipation of an increase in freight.

The company's outlook for 2012 is that it "expects continued slow but steady economic growth".

Not surprising Union Pacific reported a solid quarter and annual earnings. It is likely the company will continue to see strong growth in its chemical business as well as its automotive business this year. Volumes from the Intermodal business was a bit disappointing but a pickup in this business will likely occur as well.

Look for continued strong revenue earnings as CSX, Norfolk Southern and Kansas City Southern report next week.