Union Pacific profit jumps, shrugs off fuel and floods

CHICAGO (Reuters) - No. 1 U.S. railroad Union Pacific Corp (UNP.N: Quote, Profile, Research, Stock Buzz) reported better-than-expected quarterly profit on Thursday as strong freight rates offset rising fuel costs, flooding in the U.S. Midwest and lower freight volumes.

"Although high fuel prices and a soft economy present challenges, we remain committed to ongoing productivity and customer service initiatives as we look forward to achieving a record year," Chief Executive Jim Young said in a statement.

Union Pacific executives told analysts during a conference call that freight volumes would remain weak through the rest of the year, but rates would stay strong.

The Omaha, Nebraska-based company reported second-quarter net income of $531 million, or $1.02 per share, up from $446 million, or 82 cents per share, a year earlier.

Analysts' average earnings forecast was 92 cents a share, according to Reuters Estimates.

Union Pacific estimated that the widespread flooding in the Midwest in June reduced earnings by 5 cents per share.

"The railroad is putting in an impressive performance and continuing to deliver," said Shawn Campbell, principal of Campbell Asset Management, which manages assets of $100 million. Campbell Asset sold off its Union Pacific shares last year but continues to follow the stock.

"We may have sold this one too early," Campbell said.

Union Pacific said second-quarter revenue rose 13 percent to $4.57 billion. Analysts had expected $4.49 billion.