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Union Pacific optimistic about 2013 after solid 1Q

Thursday - 4/18/2013, 5:39pm  ET

FILE - In his Friday, Sept. 28, 2012, file photo, Engineer Ed Dickens leans out of the cab Union Pacific's historic steam Locomotive No.844 as it is moved to the California Railroad Museum in Old Sacramento, Calif. Union Pacific Corp. reports quarterly financial results before the market opens on Thursday, April 18, 2013. (AP Photo/Rich Pedroncelli, File)

JOSH FUNK
AP Business Writer

OMAHA, Neb. (AP) -- The sharp drop in coal demand that has weighed down railroad profits since last year appears to be slowly coming to an end.

Many utilities turned away from coal last year as they switched to cheaper natural gas to generate electricity. But natural gas prices have doubled in the past year, and some power companies are finding it cheaper to burn coal again.

That, and increased shipments of other goods, has railroad executives feeling more confident. After reporting an 11 percent increase in first-quarter profit Thursday, Union Pacific officials predicted a slight increase in shipping volume this year.

Union Pacific was more confident about this year's prospects than CSX, the other major freight railroad to report earnings this week. CSX said quarterly profit grew 2 percent. But officials said profit would barely grow this year before rising 10 to 15 percent in 2014 and 2015.

Union Pacific CEO Jack Koraleski told The Associated Press that everything looks good for the Omaha, Neb.,-based railroad this year, as long as normal weather patterns prevail and the economy continues growing.

"I love what I'm seeing at the moment, but I'm also cautious about whatever might cause consumer confidence to falter," Koraleski said.

Union Pacific officials said on a conference call that coal shipments appear to have bottomed out last year, so the railroad should see coal volumes improve through the rest of this year as long as the summer is hot.

The company's stock soared to new heights Thursday after its strong results. The stock gained $5.52, or 4 percent, to set a new closing record of $142.46.

Rate increases helped Union Pacific generate net income of $957 million, or $2.03 per share, in the quarter. That's up from $863 million, or $1.79 per share, a year earlier. Revenue rose to $5.29 billion revenue from $5.1 billion revenue.

The results beat Wall Street's expectations. Analysts surveyed by FactSet expected earnings per share of $1.96 on revenue of $5.22 billion.

Koraleski said he's encouraged by the improvement in the housing and automotive markets. Builders have been starting houses and apartments at the fastest pace in 4
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