UNION PACIFIC: THE INTERNATIONAL ECONOMY IS WEAKENING

We’ve been closely covering commentary out of the rail companies as they’ve reported earnings in recent weeks in order to gauge the strength of the global economy.  The general tone has been more upbeat than one might expect.  But Union Pacific made some very interesting comments this morning on their earnings conference call.  They said the international intermodal data is weakening and unlikely to improve in the coming quarter:

“The Union Pacific team delivered solid financial results across the board this quarter, achieving an all-time quarterly earnings record of $1.85 per share. That’s a 19% increase compared to 2010. We also set best-ever quarterly marks in operating revenue, operating income, driving record year-to-date free cash flow. We’re clearly delivering on the benefits of our diverse franchise. Volumes increased in 4 of our 6 business groups. The downside was weak International Intermodal and lower export grain.

…So as we look to the end of the year, I have to admit that I’ve been disappointed by the weakness on our International Intermodal peak season, but the good news is that the diversity of our franchise should continue to provide opportunities to more than offset the challenges that we face in the fourth quarter. First of all, in terms of challenges, the better world crop production and plentiful storage available for a smaller-than-expected U.S. corn crop shows that whole grain export shipments are still going to be soft in contrast to last year’s record volume. We’re also not expecting International Intermodal to get any stronger.”

They were much more upbeat about the domestic economy…..

Source: Seeking Alpha