Higher prices lift Union Pacific 2Q profit 28 pct

OMAHA, Neb. — Union Pacific said Thursday that its second-quarter net income surged 28 percent, as the nation’s largest railroad collected higher prices and fuel surcharges and handled slightly more cargo. Its shares rose 3 percent by midday.

Major freight railroads such as Union Pacific are watched closely because the cars, chemicals, crops, containers of imported goods and lumber they carry offer insight into the health of the economy.

Omaha-based Union Pacific says volume and price increases in four of its six business sectors offset weakness in coal and agriculture shipments. The railroad says automotive, chemical, industrial and intermodal shipments all improved. Total freight volume increased less than 1 percent to 2.3 million carloads.

But a 17 percent drop in quarterly coal volume was a concern for Union Pacific.

The mild winter and extremely low natural gas prices reduced demand for coal in the first half of 2012, and even with the hot summer weather, coal demand may remain weak in the rest of the year.

“Looking ahead to the second half of the year, the global economic outlook has become more uncertain and coal volumes remain a challenge,” UP CEO Jack Koraleski said.

Union Pacific reported net income of $1 billion, or $2.10 per share in the quarter ended June 30, up from $785 million, or $1.59 per share, a year ago.

The results topped the $1.97 per share that analysts surveyed by FactSet were expecting, on average.

Revenue rose 7 percent to $5.22 billion from last year’s $4.9 billion. That matched analysts’ revenue expectations.

Shares gained $3.96, or 3.3 percent, to $122.56 in midday trading.

Union Pacific’s outlook for the rest of the year depends upon the economy continuing to grow slowly, but railroad officials said Thursday that the economic outlook is clouded by Europe’s debt woes and the looming U.S. fiscal problems.

Union Pacific operates 32,400 miles of track in 23 states from the Midwest to the West and Gulf coasts.