Union Pacific Railroad is the principal operating company of Union Pacific Corporation (UNP, Financial). Union Pacific Railroad connects 23 states in the Western two-thirds of the country by rail, providing a link in the global supply chain.
The railroad’s diversified business mix includes Agricultural Products, Automotive, Chemicals, Coal, Industrial Products and Intermodal. Union Pacific serves many of the fastest-growing U.S. population centers, operates from all major West Coast and Gulf Coast ports to Eastern gateways, connects with Canada's rail systems and is the only railroad serving all six major Mexico gateways. Union Pacific provides value to its roughly 10,000 customers by delivering products in a safe, reliable, fuel efficient and environmentally responsible manner.
UNP received 2014 Logistics Excellence Awards in Customer Service and Service Performance from Toyota Logistics Services. This marked the seventh consecutive year Union Pacific has earned the Excellence in Customer Service recognition for superior performance and the fourth time in the last six years that the railroad has received the transit and service performance award.
The awards are based on Union Pacific's commitment to outstanding service, ranging from customized logistics offerings to a solid supply of equipment when and where it's needed.
Strong second-quarter results
Operating revenue during the second quarter was $5.4 billion (which declined by 10% from the prior year quarter).
Second quarter business volumes, as measured by total revenue carloads, declined 6% compared to 2014.
Quarterly freight revenue decreased by 10% as compared to the prior year quarter.
Union Pacific’s operating ratio was 64.1%.
Other income of $142 million increased $120 million compared to the second quarter 2014.
The $1.99 per gallon average quarterly diesel fuel price in the second quarter 2015 was 36% lower than the second quarter 2014.
Quarterly train speed, as reported to the Association of American Railroads, was 24.6 mph, about 3%faster compared with the second quarter 2014.
The company repurchased almost 8.0 million shares in the second quarter 2015 at an aggregate cost of $834 million.
(Source: Company’s Website)
Third-quarter dividend
The company recently declared a quarterly dividend of 55 cents per share on the company's common stock, payable Sept. 30 to shareholders of record Aug. 31. Union Pacific has paid dividends on its common stock for 116 consecutive years.
Management
The board of directors of the company recently elected Lance M. Fritz chairman, president and chief executive officer effective Oct. 1. Fritz, 52, was elected president and chief executive officer Feb. 5. He also was elected to the corporation's board of directors at that time.
Fritz was named president and chief operating officer Feb. 6. He was executive vice president - Operations from 2010-2014, and previously served as vice president - Labor Relations. Prior to that, he was regional vice president - Southern Region after serving as regional vice president - Northern Region. Fritz began his career with Union Pacific in July 2000 in Marketing and Sales as vice president and general manager - Energy.
He succeeds John J. (Jack) Koraleski, 64, as chairman. Koraleski plans to retire Sept. 30 after a 43-year career at Union Pacific in which he served as executive chairman; chairman, president and chief executive officer; executive vice president - Marketing and Sales; executive vice president - Finance and Information Technology; and others. Among his many achievements, Koraleski was named by Institutional Investor as 2014's No. 1 chief executive officer in the Airfreight and Surface Transportation sector, and his advocacy was critical in helping Union Pacific form its women's employee resource group more than 20 years ago.
Focus at the moment
- Cost curtailment.
- Churning of higher operating cash.
- The company is intentionally striking a strategic balance between strong growth and investments within innovation and infrastructure.
- International expansion.
- Relentlessly innovate product lines.
Being in news
Union Pacific Railroad was honored by Nissan (NSANF, Financial) with its Cost Leadership Award, while Union Pacific Distribution Services (UPDS) received the automotive manufacturer's Zero-Emission Leadership Award. The Cost Leadership Award recognizes Union Pacific's collaboration with Nissan to implement rail network efficiencies, including expanding Nissan's vehicle distribution network via rail and strengthening rail equipment availability.
Union Pacific was named among the Best Employers for Healthy Lifestyles for 2015 by The National Business Group on Health (NBGH).
Recognized at the gold level, Union Pacific was honored for making cultural and environmental changes and developing comprehensive programs that support employees' healthy lifestyle goals. The company was the only railroad among 64 U.S. employers to receive the 2015 Best Employers for Healthy Lifestyles award.
Union Pacific Railroad will strengthen Wyoming's transportation infrastructure investing $13.5 million in the rail line between Laramie and near Hanna. The project, funded entirely by Union Pacific without taxpayer dollars, began July 16 and is scheduled to be completed by mid-September.
The railroad will replace 74,000 railroad ties, install 23,000 tons of rock ballast and replace five miles of rail in various curves. In addition, crews will repair the surfaces at 21 road crossings. The project is one of nearly 1,500 Union Pacific will complete across its 32,000-mile network this year to help improve train operating efficiency, reduce motorist wait times at crossings and enhance safety. Union Pacific plans to spend $4.2 billion across its network this year, following investments totalling more than $31 billion from 2005-2014. These investments contributed to a 38% decrease in derailments over the last 10 years.
On a concluding note
UNP is proud of the partnerships it shares with the 7,300 communities it serves throughout the western two-thirds of the United States. It's a tradition that began more than 150 years ago, and that will continue tomorrow and beyond. It had a capital spending of $13.0 billion within 2010-2013. In the Western states, the company has a monopoly. The company has a competitive edge since there are relatively fewer entrants in the railroad industry. But again, this industry faces competition from other modes of transport.
With its extensive geographic coverage, unparalleled access to Gulf and West Coast ports, and the industry’s best access to Mexico, Union Pacific is well-positioned to compete successfully across a wide variety of business segments. In a dynamic environment, this diversity is a great strength, which will enable it to serve the growing markets of tomorrow.
The company derives strength from its diverse franchise and is currently focused on safety, service and shareholder returns. The company posted strong first quarter results and the company has good valuation. It has a good track record of returning dividends to its shareholders and is expected to do so in the future. For the last five years, the company has witnessed growth. The company has created a mark of its own in the railroad industry and boasts of a solid customer base. Momentum is going to continue for this company. Investors may consider adding this company to their portfolios.
