Union Pacific Corporation (NYSE: UNP), the No. 1 U.S. railroad, announced its financial results for the fourth quarter 2015, with net income beating estimations.
For the fourth quarter of 2016, the company reported net income of $1.14 billion, or $1.39 per share, increasing from the $1.12 billion, or $1.31 per share the same period last year. The results surpassed analysts’ expectations of $1.33 per share, and is partly attributed to efficiency improvement. Union Pacific reported its revenue of $5.17 billion, decreasing 0.8% from the same period last year, but was above the analyst estimates.
However, the coal volumes declined 6%, which followed the trend of dropping coal volume since early 2015. The decline in coal volume of Union Pacific and other U.S. railroads was caused by strong U.S. dollar, which hurt coal exports, and utilities changed to burn natural gas, which is much cheaper. For the full year 2016, the coal volume dropped 25% in total, but the company expected that the coal volumes would be stabilize next year.
“While full-year volumes were down substantially year over year, we did see declines moderate in the fourth quarter,” Lance Fritz, the chairman, president, and CEO of Union Pacific, said in the statement on Thursday.
“As we worked through the challenges of the year, we remained focused on the strategy we live each day through our six value tracks. Executing on these value tracks enables us to run a safe, efficient, and productive railroad while providing our customers an excellent value proposition,” Lance said.
For the full year 2016, net income reached $4.2 billion, or $5.07 per diluted share, dropping from $4.8 billion, or $5.49 per diluted share last year. Operation income declined 10% to $7.3 billion.
“Looking to 2017, we are fairly optimistic about some of the macro-economic indicators that drive our core business,” Lance said in the statement. The company expected that freight volumes will have a “low single digit” growth next year, and productivity gains would be between $350 million and $400 million. In addition, the capital expenditure will decrease from the $3.5 billion in 2016 to about $3.1 billion next year.