Union Pacific beats profit estimates on stronger pricing, resumes share buyback

FILE PHOTO: Union Pacific livery on the side of a cargo locomotive is pictured ahead of a possible strike if there is no deal with the rail worker unions, at Union Station in Los Angeles, California, U.S., September 15, 2022. REUTERS/Bing Guan/File Photo

(Reuters) -Railroad operator Union Pacific said it will restart share repurchases in the second quarter as it beat Wall Street estimates for first-quarter results on Thursday, with strong pricing offsetting lower volumes.

Shares of the company were up nearly 6% in pre-market trading

The company, seen as a bellwether for the U.S. economy, has continued to face volume headwinds while maintaining excess capacity.

The slowdown in demand is particularly pronounced in the bulk segment, where coal volumes have declined as the U.S. is increasingly stockpiling cheap natural gas instead.

In response to a challenging freight market, the railroad operator has continued to price its services above the rate of inflation, mirroring a trend seen across sectors such as retail and industrials.

The company reported operating revenue of $6.0 billion in the first quarter ended March, flat year-on-year, but above analysts’ estimates of $5.98 billion, as per LSEG data.

To offset lower volumes, the Omaha, Nebraska-based company has been seeking new business in segments such as biofuels and petrochemicals.

It has also sought to improve its service efficiency, which came under shareholder pressure in 2023 after the company’s operating ratio rose for several quarters.

Union Pacific reported an operating ratio of 60.7% for the first quarter, an improvement from last year’s 62.1%. The ratio is a keenly watched metric that indicates operating expenses as a percentage of revenue.

Union Pacific’s net income of $1.6 billion, or $2.69 per share, was also flat year-on-year but came in above estimates of $2.51 per share.

(Reporting by Ananta Agarwal in Bengaluru; Editing by Tasim Zahid)