$UNP (-0,72 %) Pacific reported net income of $1.8 billion for the fourth quarter of 2024, up from $1.7 billion a year earlier, as higher rail freight volumes led to record profits.
The largest Class 1 railroad reported full-year 2024 net income of $6.7 billion, up from $6.4 billion in 2023.
"We had a very successful year in 2024 with an operating ratio of over 58%," said CEO Jim Vena in an interview with analysts and media. "This demonstrates how our team executed strategy, safety and service for overall operational excellence."
"It was a fantastic end to 2024."
While wagonload volumes increased by 5% year-on-year, operating revenue fell by 1% to USD 6.1 billion in the fourth quarter, which ended on December 31. This was due to lower income from fuel surcharges and an unfavorable business mix. However, this was partially offset by higher volumes and core price increases.
Intermodal traffic increased by 16% in the quarter, but average revenue per car fell by 9% compared to the previous year.
Due to strong import demand, international intermodal volumes increased by 26%, outperforming the strong container flows via the West Coast ports.
Domestic intermodal traffic grew as the railroads took more and more shipments away from trucks.
The number of wagonloads sold rose by 5 %, particularly for fertilizers (up 3 %) and grain and chemicals (up 8 %).
Coal revenues continued their long-term decline, falling 29% in the quarter, but UP expects to partially offset this decline in 2025 under a new contract with the Lower Colorado River Authority of Texas, an electric utility.
Grain benefited from a good harvest and strong export business to Mexico, while demand for plastics also increased, Kenny Rocker, executive vice president of marketing and sales, said in the conference call. "There was weaker demand for building materials, sand and stone. We are closely monitoring potential tariff changes that could impact volumes. We expect a weaker economic environment in 2025."
Freight volumes are to be increased through ongoing project developments worth 1.5 billion US dollars. A particular target in this area is the Gulf Coast.
The operating ratio was 58.7%, an improvement of 220 basis points, whereby the ratification of a new wage agreement had an unfavorable effect of 70 basis points.
Operating income increased 5% to a record $2.5 billion.
"There are a lot of unknowns in 2025 - tariffs, regulatory changes, interest rates - but it's been that way for the 40-plus years I've been in the railroad business. It is what it is," said Vena, who began his career as a train conductor. "Operating with a 'buffer' in wagons, locomotives and operational capacity has paid off. We expect high single-digit to low double-digit growth in 2025."
Source: freightwaves.com