DETROIT (Reuters) - Union Pacific Corp (UNP.N) on Thursday reported better-than-expected quarterly profit, lifted in particular by a 25 percent jump in coal freight volume, and said it expects its freight business to grow in the low single digits in 2017.
Like other major U.S. railroads, Union Pacific has been hit over the past two years by a plunge in coal volumes as utilities switched to burning cheaper natural gas and the strong U.S. dollar hurt coal exports.
Coal freight volumes for U.S. railroads have picked up in recent months from a low base.
“Coal seems to have stabilized and we are seeing signs of improvement in other areas of the economy,” Chief Executive Lance Fritz said on a conference call with analysts.
The No. 1 U.S. railroad’s shares rose 3 percent in early trading.
Omaha, Nebraska-based Union Pacific said overall volumes, as measured by total revenue carloads, increased 2 percent in the quarter, compared with a year earlier.
Union Pacific said it expects to improve its operating ratio, a key metric for Wall Street that measures expenses as a percentage of revenue, this year and that it plans to cut annual costs by up to $400 million.
The railroad said it expects to increase prices at a rate greater than the pace of inflation this year.
Union Pacific’s net income rose to $1.07 billion, or $1.32 per share, in the first quarter, from $979 million, or $1.16 per share, a year earlier.
Total operating revenue rose 6.3 percent to $5.13 billion.
Analysts on average had expected first-quarter profit of $1.23 per share, and revenue of $5.04 billion, according to Thomson Reuters I/B/E/S.
Union Pacific shares were last up 3.1 percent at $113.55.
Additional reporting by Ankit Ajmera in Bengaluru; Editing by Arun Koyyur and Meredith Mazzilli