UP posts 'strong' Q1, expects Q2 volumes to fall 25 percent

Union Pacific Railroad today posted first-quarter net income of $1.5 billion, or $2.15 per diluted share, compared to $1.4 billion, or $1.93 per diluted share, a year ago. 

Operating revenue during the quarter declined 3 percent to $5.2 billion compared with the same quarter last year. Business volumes as measured by total revenue carloads fell 7 percent during the period versus a year ago, UP officials said in a press release.

Industrial volumes rose 3 percent compared with 2019, while bulk and premium shipments declined 5 percent and 6 percent, respectively. In addition, quarterly freight revenue dipped 3 percent to $4.9 billion compared to Q1 2019, as positive business mix and core pricing gains were offset by lower volumes and decreased fuel surcharge revenue.

UP posted an operating ratio of 59 percent, a quarterly record and the fourth consecutive quarter below 60 percent. The OR improved 4.6 points compared to Q1 2019.

"Against the backdrop of the emerging COVID-19 pandemic and a challenging volume environment, we leveraged productivity to deliver strong financial results, including an all time best operating ratio of 59 percent," said UP Chairman, President and Chief Executive Officer Lance Fritz. "We also made substantial improvement in employee safety, which is a testament to our dedicated employees. Our rail network has never run better, providing a safer, more reliable and efficient service product to our customers."

UP officials project second-quarter carload volumes will be down 25 percent compared to Q2 2019. In addition, capital expenditures in 2020 will be reduced by $150 million to $200 million because of economic uncertainty.

Although the situation remains unclear, UP expects to maintain sufficient liquidity to sustain an extended period of lower volumes, company officials said.

"The 18-month implementation of Unified Plan 2020 has put our company in a position of strength, with a strong balance sheet and ample liquidity, as we face today's fluid and uncertain situation," said Fritz. "We remain focused on providing a highly consistent, reliable and efficient service product for our customers."

To learn more about UP's Unified Plan 2020, read this feature in Progressive Railroading's March issue.