OMAHA, Neb. — Union Pacific reported $6.1 billion jump in fourth-quarter profit thanks to a sweeping change in U.S. tax laws, but the profit growth was a more modest $60 million when that one-time benefit is stripped away.
The Omaha, Nebraska, railroad on Thursday reported a profit of $7.28 billion, or $9.25 per share. Without the tax changes, Union Pacific estimated it made $1.2 billion, or $1.53 per share.
The results were just below the $1.54 per share that analysts surveyed by Zacks Investment Research expected.
Union Pacific said its revenue grew 5 percent to $5.45 billion in the quarter even though it only hauled 1 percent more freight. Six analysts surveyed by Zacks expected $5.41 billion revenue.
Union Pacific CEO Lance Fritz said he expects more volume growth in 2018 that will help the railroad deliver better results.
“We are optimistic the economy will favor a number of our market segments leading to another year of positive volume growth,” Fritz said.
Wall Street apparently was looking for more from UP. Its stock was down more than 5 percent at $133.26 in afternoon trading.
The future of the North American Free Trade Agreement remains a concern because about 11 percent of Union Pacific’s business involves shipments to or from Mexico. Fritz said he is watching the negotiations closely.
“While I still believe there is a good opportunity for the NAFTA agreement to be solidified — all three parties continue in it going forward — we have a strong eye on all of the what-ifs and contingency plans,” Fritz said.
One of the things that slowed some Union Pacific trains in the fourth quarter was the railroad’s installation of positive train control, which can automatically stop a train in an emergency. The railroad is in the process of installing the system ahead of a federal deadline at the end of 2018.
Fritz said most of the disruptions related to the braking system are temporary, but UP has to debug the system as it is installed because it is a new system.
Edward Jones analyst Dan Sherman said Union Pacific delivered a reasonably good quarter, and he’s confident the railroad will address the slowdowns it experienced.
For all of 2017, Union Pacific reported $10.7 billion net income, or $13.36 per share. Without the largely paper benefit of the tax cuts, Union Pacific reported $4.6 billion net income, or $5.79 per share.
The railroad operates 32,400 miles of track in 23 states.
Elements of this story were generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on UNP at https://www.zacks.com/ap/UNP