OMAHA, Neb. (AP) — Union Pacific delivered 5% higher earnings in the first quarter as the railroad worked to prepare its case to convince regulators that its $85 billion acquisition of eastern rival Norfolk Southern is a good idea.
The Omaha, Nebraska-based railroad said Thursday that it earned $1.7 billion, or $2.87 per share. but it estimated that merger-related costs weighed down the results by 6 cents per share. That’s still up from last year’s $1.63 billion, or $2.70 per share. And the results topped the $2.86 per share that the analysts surveyed by FactSet Research expected.
Union Pacific CEO Jim Vena said the railroad continued to get more efficient during the quarter as it benefited higher rates even as it prepared its case for the merger.
“Our safety, service, and operating momentum continued in the first quarter as we further challenged ‘what’s possible’ from our great railroad,” Vena said.
The railroad’s revenue grew 3% to $6.22 billion even though it hauled about 1% fewer shipments. That’s because the rates it charges continued to increase and the railroad benefited from fuel surcharge fees.
Union Pacific’s expenses also grew 3% to $3.76 billion.
The railroad affirmed its outlook for midsingle digit growth in its earnings per share this year in line with its long-term plan. It plans to invest $3.3 billion in its operation.
Union Pacific plans to resubmit its application to acquire Norfolk Southern next week. The U.S. Surface Transportation Board rejected the railroad’s first request to approve the $85 billion merger because the regulators wanted more information. The STB hasn’t yet decided whether the deal that would cut the number of major freight railroads down to five will hurt competition.
The deal that would create the nation’s first transcontinental railroad has divided labor and the shippers who rely on both railroads. UP is already one of the biggest railroads and it serves the western United States. The nation’s largest rail union and a number of the smaller ones supported the merger after Union Pacific promised that their workers would have jobs for life, but two of the other largest unions that represent engineers and track maintenance workers oppose it.
The railroads’ customers are also split with trade groups representing chemical makers and agricultural businesses expressing concerns, but hundreds of other businesses lining up behind it. President Donald Trump has also said the deal sounds good to him.
Vena has argued that creating a railroad that stretches from coast to coast would be good for the economy because without the need for a hand-off between railroads in the middle of the country rail shipments would move faster, meaning it could better compete against trucking.
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