Union Pacific Corp. posted a 24 percent decline in second-quarter operating revenue and a 28 percent decline in net income as the Class I faced a 20 percent drop in volume due to the economic impact of the COVID-19 pandemic.
The Class I reported second-quarter 2020 net income of $1.1 billion, or $1.67 per diluted share, compared with $1.6 billion, or $2.22 per diluted share, a year ago.
"The second-quarter proved very challenging as we faced a volume decline of 20 percent due to the economic impact of the COVID-19 pandemic," said Chairman, President and Chief Executive Officer Lance Fritz in a press release. "Demonstrating the transformation our company is experiencing through the implementation of Unified Plan 2020, we were able to largely mitigate the impact of that volume loss."
Operating revenue during the quarter fell 24 percent to $4.2 billion from $5.6 billion a year ago. Volumes, as measured by total revenue carloads, were down across all three businesses: bulk, industrial and premium. Quarterly freight revenue decreased 24 percent as core pricing gains were offset by lower volumes, negative business mix and decreased fuel surcharge revenue.
Total operating expenses fell 22 percent to $2.6 billion from $3.3 billion a year ago.
UP reported a 61 percent operating ratio for the quarter, up from 59.6 percent in second-quarter 2019.
Also during the quarter:
• UP recognized a $69 million gain from a real estate sale to the Illinois State Toll Highway Authority;
• The $1.26 per gallon average quarterly diesel fuel price was 43 percent lower than Q2 2019;
• Freight car velocity was 225 daily miles per car, an 11 percent improvement compared to the same period last year;
• Average maximum train length was 8,664 feet, a 13 percent increase compared to Q2 2019.
Looking ahead, UP executives — noting that the state of the global economy remains uncertain given the lingering impact of the pandemic — expect full-year 2020 carload volumes to be down about 10 percent compared to 2019 levels.
"Our first priority continues to be the health and safety of our employees during the pandemic, as they perform critical service to support economic recovery," said Fritz. "Our ability to be nimble and flexible in adjusting our resources to rapidly changing volumes, while providing a high level service product, demonstrates the strength of our service model."