King Coal has fallen off its throne but railroads are shipping higher quantities of freight to make up for the loss. On Thursday, Union Pacific's (UNP) first-quarter earnings topped estimates on higher auto, chemicals and oil shipments.
The railroad operator said Q1 earnings jumped 13% to $2.03 per share, beating analyst expectations of $1.95. Operating revenue rose 3% to $5.3 billion, above estimates of $5.1 billion. Sales growth has trended lower over the past year.
Union Pacific shares rose 4% to 142.65, hitting a new high. CSX (CSX) shares rose 1%, but after dropping nearly 3% Wednesday following its quarterly earnings report. Kansas City Southern (KSU) fell 0.5%.
"Union Pacific achieved record first-quarter financial results, leveraging the strengths of our diverse franchise despite significantly weaker coal and grain markets," CEO Jack Koraleski said.
Chemical freight revenue rose 14% and automobile freight revenue climbed 13%. Crude oil shipments more than doubled vs. a year earlier as rail continues to benefit from the shale drilling boom.
Intermodal freight, which has become popular in recent years as the shipping container can be carried by rail, ship or truck without having to be repackaged, rose 9%.
Coal freight revenue fell 6% and agricultural freight 9%. Despite coal's overall slide, the Omaha, Neb.-based Union Pacific still carries a lot of high-quality coal from Wyoming's Powder River Basin. It operates in 23 states in the western U.S.
Business volumes, measured by total revenue carloads, fell 2% on the decline of coal and agriculture. Industrial product revenues were flat on a drop in hazardous waste shipments.
Diesel prices were flat at $3.23 a gallon. Average train speed was flat at 26.4 miles per hour.
Overall volume fell 2%. Union Pacific sees flat volume in Q2 but a gain for the full year.
The Transportation-Rail group is ranked No. 67 out of the 197 industries that IBD covers.
CSX late Tuesday reported a 5% rise in earnings to 45 cents per share, snapping three quarters of deceleration. Analysts expected a decline to 40 cents. Revenue was flat at $3 billion, slightly beating estimates as merchandise and intermodal businesses offset weaker coal shipments.
The East Coast railroad does not have shipments of the high-value Western coal to boost earnings. But CSX has been improving its infrastructure so it can carry more intermodal freight.
CSX raised its quarterly dividend 7% to 15 cents a share and approved a $1 billion buyback.
Kansas City Southern is slated to report earnings Friday. Analysts expect a 17% gain to 88 cents a share, with revenue up 4% to $571.33 million.
Kansas City Southern leads the railroad group with a Composite Rating of 88. Union Pacific is second with an 86 rating.
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