Union Pacific Cuts Costs, Raises Profit -- Update
By Paul Ziobro
Union Pacific Corp.'s second-quarter profit rose even as it
shipped less cargo, as the railroad operator got a boost from cost
cuts tied to its new operating plan, including fewer jobs and lower
The railroad said it will continue to slim down as it plans
further job reductions -- as much as 10% for the full year -- and
other productivity measures amid a weak freight shipping
environment, in which volume is expected to fall 2% in the second
half of 2019.
Union Pacific is in the midst of a significant overhaul where it
is running fewer, longer trains, sorting railcars less frequently
and reworking operations across its network. Other freight
railroads, including Norfolk Southern Corp. and Kansas City
Southern, are on similar paths, mirroring the changes that CSX
Corp. made on its network in recent years.
The cost reductions are helping as the railroads confront less
business. With trade uncertainty and a weak industrial economy,
freight traffic remains depressed on the railroads, damping
Union Pacific's operating revenue declined 1% to $5.6 billion in
the second quarter as shipping volume fell 4%. But operating
expenses fell 7% as the company reduced its workforce by 8%, or
about 3,500 people, from a year earlier.
Second-quarter business volumes, as measured by total revenue
carloads, declined 4%. Industrial volumes increased, shipments of
agricultural products were flat, and energy and agricultural
Profit rose 4% to $1.57 billion, or $2.22 a share, from $1.51
billion, or $1.98 a share, a year earlier.
The changes resulted in an operating ratio -- a closely watched
metric that measures the percentage of revenue consumed by
expenses, where a lower figure represents an improvement -- of
59.6%. The performance came even as Union Pacific dealt with severe
weather, including flooding that kept part of its network down.
While such changes, including idling hundreds of locomotives and
deep job cuts, can be disruptive to railroads and their customers,
Union Pacific says it continues to make changes carefully and by
communicating closely with shippers.
"We're trying to do this in a systematic manner instead of
blowing it up, " Union Pacific Chief Operating Officer Jim Vena
said. "We're getting out in front of it. We tell the customer what
--Aisha Al-Muslim contributed to this article.
Write to Paul Ziobro at Paul.Ziobro@wsj.com
(END) Dow Jones Newswires
July 18, 2019 14:13 ET (18:13 GMT)
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