Union Pacific signals staff crunch from COVID-19 to pressure volumes

By Abhijith Ganapavaram and Nathan Gomes

(Reuters) – Union Pacific Corp (NYSE:) said COVID-19 cases among its staff and paid time off for people getting inoculated may hurt its ability to move freight in the current quarter, but that impact should still be less than the 4% slump in volume in the previous quarter.

The company’s chief executive officer Lance Fritz, in an interview with Reuters on Thursday, did not disclose the number of positive COVID-19 cases but said it had a “real impact” on operations.

Fritz, however, stuck to the company’s 2022 volume guidance and remains confident it will be ahead of U.S. industrial production, which is forecast to grow at 4.8% for the year.

Staff shortages due to COVID-19 cases may be the latest headache for North American railroad operators, who are already grappling with supply chain disruptions.

Evercore ISI analyst Jonathan Chappell warned that staff COVID-19 cases and paid time offs will likely hit shipments at other rail operators as well.

CSX Corp (NASDAQ:) is set to report its results after the bell on Thursday while Canadian National Railway (TSX:) Co, Canadian Pacific (NYSE:) Railway Ltd and Norfolk Southern Corp (NYSE:) are reporting next week.

PRICE HIKES BOOSTS RESULTS

Union Pacific took advantage of a strong industrial demand to ship freight at higher prices during the quarter. Total operating revenue in the quarter ending Dec. 31 rose 12% to $5.73 billion, above analyst estimates of $5.58 billion, according to Refinitiv data.

Operating ratio at the largest U.S. railroad operator by market value improved to 57.4% from 61% a year earlier.

However, overall volume shipped during the quarter fell 4% as supply chain disruptions hit automotive and intermodal freight.

Net income for the quarter rose to $1.71 billion, or $2.66 per share, from $1.38 billion, or $2.05 per share, a year ago.

Shares of the company were up about 2% in afternoon trade.

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