Union Pacific Corp. shares rose the most in four months Thursday after the biggest North American railroad exceeded $1 billion in quarterly profit for the first time, beating analysts’ estimates on higher automotive and chemical shipments.
The shares gained 3.5 percent to $122.77 at the close in New York, for the biggest one-day increase since March 15 and the highest price in Bloomberg data dating to July 1980. Union Pacific has risen 16 percent this year.
Automotive shipments rose 15 percent while chemicals, which include material used in hydraulic fracturing for natural gas, increased 12 percent, the Omaha, Nebraska-based company said today in a statement. That helped Union Pacific overcome a drop of 17 percent in volumes for coal, its biggest freight category, amid low prices for natural gas. Prices for gas have dropped because of the increased supply from so-called fracking.
“It was a very, very strong quarter,” Brad Delco, a Little Rock, Arkansas-based analyst with Stephens Inc., said in a telephone interview. “Based on where their network is located around the Gulf, they have one of the strongest chemical networks and so combined low natural gas prices likely is driving a lot of activity in the chemical business.”
Net income advanced 28 percent to $1 billion, or $2.10 a share, from $785 million, or $1.59, a year earlier. The average of 26 estimates compiled by Bloomberg was for profit of $1.97 a share. Sales gained 7.5 percent to $5.22 billion, in line with analysts’ estimates. Revenue a year earlier was $4.86 billion.
“The net result was our best-ever quarter by nearly every financial measure,” Chief Executive Officer Jack Koraleski said in the statement.
Growth in other markets should continue to offset the coal decline and “we are forecasting volumes to be on the positive side of the ledger for the full year,” Chief Financial Officer Robert Knight said during a conference call today.
“The only thing you have to worry about with UNP right now is that it is hitting all-time highs,” Jason Seidl, a New York- based analyst at Dahlman Rose & Co., said in a telephone interview. “In the near term are some investors going to look to take some profits with all of the uncertainty that’s out there?”
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