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Researched by Industrial Info Resources (Sugar Land, Texas)--Rail operator Union Pacific Corporation (NYSE:UNP) (Omaha, Nebraska) reported net income of $1.14 billion for fourth-quarter 2016 compared with $1.12 billion in fourth-quarter 2015. Despite an overall decline in shipping volumes, cost-cutting measures helped lift the company's bottom line. Industrial Info is tracking $973 million in projects involving Union Pacific.
The company showed the most gain in the shipment of agricultural products, which showed an 8% increase in the number of carloads year-over-year and a 7% increase in revenue. However other sectors, including automotive, chemicals, coal, industrial products and intermodal all showed declines in income for the quarter. Coal showed one of the largest revenue declines, falling from $745 million in fourth-quarter 2015 to $699 million in fourth-quarter 2016, representing a 6% decline in revenue from a 9% volume decrease.
The company sees a bright spot in its service to U.S. oil and gas drilling programs. "We're pretty excited about the inflection point we saw in the rigs and them coming up slowly over the second half of last year," said Chief Marketing Officer Beth Whited in a conference call regarding the earnings. "A lot of the growth is coming in the Permian Basin, which is a strength-point in our franchise, so we do expect to see good year-over-year comps in frac sand as the year progresses."
In the conference call, Chief Operating Officer Cameron Scott discussed the company's planned capital expenditures in 2017. "For 2017, we are targeting around $3.1 billion, pending final approval of our board of directors," said Scott. This compares with $3.5 billion in capital expenditures in 2016. "More than half of our planned 2017 capital investment is replacement spending to harden our infrastructure, replace older assets and to improve the safety and resiliency of the network." The company is planning approximately $1.86 billion in infrastructure replacement and $300 million for positive train control projects. Positive train control is a system of controls that helps trains avoid collisions and allows for better tracking across the U.S. rail system. The deadline for installation is December 31, 2018, with possible extensions allowed. In addition, the company will spend approximately $435 million on new locomotives in 2017.
Among the Union Pacific projects being tracked by Industrial Info is the $400 million grassroot rail switching and classification yard near Hearne, Texas. The 700-acre site will enable the railroad to sort rail cars where seven of its lines cross, serving the Houston, Dallas, Austin and San Antonio areas, as well as locations along the Gulf Coast and in east Texas. The project is planned to kick off this spring and take about year and a half to complete.
Another grassroot classification railyard is planned near Red Rock, Arizona, where on a 950-acre site, a 6-mile-long switching yard will allow for greater capacity and efficiency throughout the state. The project could begin in the late third quarter of this year and be completed in mid-2019.
On the infrastructure improvement side, the company is planning a state-wide network upgrade and rehabilitation program in Louisiana. The program has an estimated total investment value of $100 million and will last throughout 2017. The company has approximately 1,152 miles of track in the state.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
The company showed the most gain in the shipment of agricultural products, which showed an 8% increase in the number of carloads year-over-year and a 7% increase in revenue. However other sectors, including automotive, chemicals, coal, industrial products and intermodal all showed declines in income for the quarter. Coal showed one of the largest revenue declines, falling from $745 million in fourth-quarter 2015 to $699 million in fourth-quarter 2016, representing a 6% decline in revenue from a 9% volume decrease.
The company sees a bright spot in its service to U.S. oil and gas drilling programs. "We're pretty excited about the inflection point we saw in the rigs and them coming up slowly over the second half of last year," said Chief Marketing Officer Beth Whited in a conference call regarding the earnings. "A lot of the growth is coming in the Permian Basin, which is a strength-point in our franchise, so we do expect to see good year-over-year comps in frac sand as the year progresses."
In the conference call, Chief Operating Officer Cameron Scott discussed the company's planned capital expenditures in 2017. "For 2017, we are targeting around $3.1 billion, pending final approval of our board of directors," said Scott. This compares with $3.5 billion in capital expenditures in 2016. "More than half of our planned 2017 capital investment is replacement spending to harden our infrastructure, replace older assets and to improve the safety and resiliency of the network." The company is planning approximately $1.86 billion in infrastructure replacement and $300 million for positive train control projects. Positive train control is a system of controls that helps trains avoid collisions and allows for better tracking across the U.S. rail system. The deadline for installation is December 31, 2018, with possible extensions allowed. In addition, the company will spend approximately $435 million on new locomotives in 2017.
Among the Union Pacific projects being tracked by Industrial Info is the $400 million grassroot rail switching and classification yard near Hearne, Texas. The 700-acre site will enable the railroad to sort rail cars where seven of its lines cross, serving the Houston, Dallas, Austin and San Antonio areas, as well as locations along the Gulf Coast and in east Texas. The project is planned to kick off this spring and take about year and a half to complete.
Another grassroot classification railyard is planned near Red Rock, Arizona, where on a 950-acre site, a 6-mile-long switching yard will allow for greater capacity and efficiency throughout the state. The project could begin in the late third quarter of this year and be completed in mid-2019.
On the infrastructure improvement side, the company is planning a state-wide network upgrade and rehabilitation program in Louisiana. The program has an estimated total investment value of $100 million and will last throughout 2017. The company has approximately 1,152 miles of track in the state.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
