Union Pacific (NYSE: UNP) had a strong enough December that it now believes its full-year operating ratio for 2018 will be improved.
In a Wednesday 8-K filing with the Securities and Exchange Commission, Union Pacific said it expects to report a "record full-year" operating ratio of 62.7 percent. That is just one-tenth of one percentage point better than in 2017.
But that's not what the company predicted as recently as November. On November 29, at a conference held by Stephens Inc., UP executive vice president and COO Robert Knight said there would be no improvement in operating revenue for full-year 2018 operations.
Don't miss it. Register today.
In the SEC statement, UP said the improvement in late 2018 that is leading to the small improvement in operating revenue was created by "higher revenue, lower diesel fuel prices and improved cost performance." It also quoted Knight as saying that December car loadings were "stronger than expected, led by international container imports."
But back in November, the outlook was more pessimistic. "While volume growth is still strong, we are not seeing the normal seasonal ramp-up in our export grain business due to the tariffs and foreign competition," Knight said, according to a transcript of his presentation. He spoke also of the changes that UP had made as part of its Unified Plan 2020, UP's move toward precision railroading. "While we are confident the actions we are taking will produce near-term results, the timing of these initiatives may not support an improved operating ratio performance for the full year 2018," Knight said back in November.
While the improvement in operating revenue is tiny, it is significant in that the companies that have moved toward precision railroading – UP and Norfolk Southern (NYSE: NSC) – have been pressured to do so by the sub-60 operating revenues posted by CSX Corporation (NASDAQ: CSX) which is all in with precision railroading, as well as Canadian Pacific (NYSE: CP) and Canadian National (NYSE: CNI). Norfolk Southern is expected to disclose in February just what it intends to do on its precision railroading initiative, while Union Pacific made clear on its latest earnings call back in October that it is fully committed to the model.
Union Pacific's stock closed Wednesday at $150.36 but was reported up after hours 1.8 percent by SeekingAlpha. However, Barchart was reporting before the Thursday opening that the stock was up just 0.4 percent.
Want more content like this? Click here to Subscribe
See more from Benzinga
- Chattanooga's Transport & Logistics Industry Gathers At FW's First Freight Alley Meetup
- FreightWaves NOW - January 9, 2019
- Weekly Market Update: New Year Starts With Strong Volume
© 2019 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.