Union Pacific 3Q profit up 33 pct and rail still improving

Union Pacific delivered a 33 percent improvement in its third-quarter profit, and executives discussed more details of their plan to cut costs at the railroad.

The Omaha, Nebraska-based railroad said Thursday it earned $1.59 billion, or $2.15 per share, in the quarter. That's up from $1.19 billion, or $1.50 per share, a year ago.

The results exceeded the average Wall Street forecast of $2.09 per share, according to a survey by Zacks Investment Research.

UP CEO Lance Fritz said the railroad is beginning to overhaul the way it operates in order to reduce costs.

"We're evaluating everything with an eye toward streamlining," Fritz said.

Earlier this week, Union Pacific announced plans to lay off 475 workers and eliminate 200 contract jobs as part of its overall effort to reduce its expenses and improve profits. The railroad said more job cuts are possible next year.

In addition to layoffs, Union Pacific has parked 625 locomotives since August as it works to streamline operations. The railroad also announced plans to consolidate its operating and engineering units.

Edward Jones analyst Dan Sherman said it remains to be seen how Union Pacific's cost cutting will measure up against rival CSX, which has aggressively overhauled its operating model over the past two years.

Union Pacific's reforms are based on the same strategy CSX is using, but UP is taking a more measured approach to implementing them.

Union Pacific's revenue grew 10 percent to $5.93 billion during the quarter as the railroad hauled 6 percent more freight. The revenue beat analysts' forecast of $5.88 billion.

Fritz said the economy appears to be in good shape with consumers and the industrial customers Union Pacific serves expressing optimism. The new trade agreement with Canada and Mexico is a relief, but he said trade disputes with other countries remain a concern.

"Trade still remains the single biggest potential disruptor," he said.

Union Pacific Corp.'s stock closed Thursday up $3.70, or 2.6 percent, at $144.15. It has risen 7.5 percent since the beginning of the year, while the Standard & Poor's 500 index has declined nearly 1 percent. The stock has climbed 31 percent in the last 12 months.

Union Pacific operates 32,400 miles of track in 23 western states.

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A portion of this story was generated by Automated Insights using data from Zacks Investment Research. Access a Zacks stock report on UNP at https://www.zacks.com/ap/UNP