Union Pacific now expects record operating ratio for 2018

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OMAHA, Neb. — Union Pacific will report a record-low operating ratio for 2018 thanks to an unexpected combination of lower costs and strong traffic volume in December, the railroad said in a regulatory filing on Wednesday.

On Nov. 29, UP warned that it did not expect an improvement in its full-year operating ratio due to slowing revenue growth and higher costs related to sluggish operations and employee severance costs as it laid off 475 workers.

But UP now expects to report an operating ratio of 62.7 percent for 2018, a 0.1-point improvement over 2017.

UP said December revenue came in higher than expected, while lower fuel prices and “improved cost performance” helped nudge the operating ratio down.

“December carloadings were stronger than expected, led by international container imports,” Chief Financial Officer Rob Knight said in the filing. “We are also encouraged to see improved cost performance driven by early results from our Unified Plan 2020 implementation.”

UP 2020 is the new operating plan, based on the principles of Precision Scheduled Railroading, that UP began implementing on Oct. 1. UP expects to complete the rollout of the operating plan by the middle of this year, which is several months ahead of schedule.

UP aims to reduce its operating ratio to 60 percent by 2020 and has a long-term target of 55 percent.

The operating ratio, a key measure of railroad efficiency, represents the percentage of revenue that’s eaten by expenses.

UP will report fourth-quarter and full-year earnings on Jan. 24.

NEWSWIRETrains News Wire

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