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Union Pacific's 2Q profit climbs 17 per cent as railroad hauls more freight, increases rates

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OMAHA, Neb. - Union Pacific Corp. said Thursday that its quarterly profit climbed 17 per cent as the railroad hauled 8 per cent more freight and raised shipping rates.

The Omaha, Nebraska-based company said it hauled more agricultural, automotive, intermodal, industrial and coal shipments. The only area where volume slipped was in chemicals, which dipped 1 per cent because crude oil shipments declined.

Union Pacific Chief Executive Jack Koraleski said those shipments show the economy is continuing to gradually improve, making railroad executives optimistic about the rest of the year.

"The fundamentals of the economy are positive and they continue a nice, slow-growth trajectory," Koraleski said.

The railroad operator said profit increased to $1.29 billion, or $1.43 per share, in the second quarter. That's up from $1.11 billion, or $1.18 per share, a year ago. The analysts surveyed by Zacks Investment Research expected profit of $1.42 per share on average.

Union Pacific's earnings per share were helped by the railroad's purchase of 8.3 million shares of its own stock for $806 million during the quarter.

The railroad said revenue rose 10 per cent to $6.02 billion from $5.47 billion in the same quarter a year earlier, and beat Wall Street forecasts. Analysts expected $5.98 billion, according to Zacks.

Citi analyst Christian Wetherbee said Union Pacific's solid results in the quarter are likely to continue to result in good stock performance for investors.

Its shares declined 74 cents to $101.77 Thursday, but are up 21 per cent since the start of this year and 28 per cent over the past year.

Federal regulators proposed new rules Wednesday to improve the safety of railroads transporting crude oil and ethanol in the wake of several fiery accidents.

Koraleski noted the industry has been working with regulators, so he said he wasn't surprised by the rules that call for better tank cars to carry flammable liquids and impose some restrictions on railroads.

But he said Union Pacific will submit comments on the proposed rules and suggest some changes. For instance, Koraleski said he doesn't think it makes sense to extend a 40 mph speed limit railroads are using when hauling crude oil through urban areas to the entire railroad system.

"We think it's unnecessary and it would slow our network," he said.

Union Pacific operates 32,400 miles of track in 23 states from the Midwest to the West and Gulf coasts.

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