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Union Pacific’s second-quarter profit jumped 59% as the railroad hauled 22% more cargo than a year ago when shipments fell to the lowest levels of the coronavirus pandemicBy JOSH FUNK AP Business WriterJuly 22, 2021, 5:45 PM• 3 min readShare to FacebookShare to TwitterEmail this articleOMAHA, Neb. — Union Pacific’s second-quarter profit jumped 59% as the railroad hauled 22% more cargo than a year ago when shipments fell to the lowest levels of the coronavirus pandemic.The Omaha, Nebraska-based railroad said Thursday that it earned $1.8 billion, or $2.72 per share, during the quarter. That’s up from $1.13 billion, or $1.67 per share, a year ago.The results surpassed Wall Street expectations. The average estimate of six analysts surveyed by Zacks Investment Research was for earnings of $2.55 per share.Union Pacific CEO Lance Fritz said the railroad delivered strong results despite the ongoing congestion issues in West Coast ports and at the key rail hub of Chicago as demand for imported products surged. Some of those problems are likely to linger through the rest of the year because of a shortage of trucks to haul shipping containers out of the ports and rail terminals.“It’s hard to increase capacity in any part of the supply chain rapidly,” Fritz said. “And the demand is very strong.”This week Union Pacific temporarily stopped hauling shipping containers from West Coast ports to Chicago for up to a week to help alleviate the congestion in that city.The number of shipments Union Pacific handled during the quarter was up in every category of freight. A year ago, restrictions related to the pandemic caused more than a 20% drop in shipping volume across all major railroads. Current shipping volumes are nearly even with the second quarter of 2019 signaling that demand is back at pre-pandemic levels.“There is strength across most of the economy,” Fritz said.Union Pacific said it now expects shipping volume to grow 7% overall this year as the economy continues to recover from the pandemic. That’s up slightly from its previous prediction of 6% volume growth.Edward Jones analyst Jeff Windau said Union Pacific has handled the surge in volumes efficiently so far without hiring many new workers, and it has been able to deliver strong profits in the process by increasing prices while handling more freight.The railroad said its revenue grew 30% to $5.5 billion in the period, which also topped Street forecasts. Three analysts surveyed by Zacks expected $5.38 billion.Fritz said a recent executive order that President Joe Biden issued to encourage competition could hurt railroads if it prompts the Surface Transportation Board to issue new regulations on the industry. He said railroads play a key role in the economy and are already helping accomplish several of Biden’s goals by helping companies reduce their emissions compared to shipping by truck, offering high-paying union jobs and paying for their own tracks and other infrastructure.“This executive order puts a headwind in front of that,” he said.Union Pacific shares have increased slightly more than 4% since the beginning of the year, while the S&P 500 index has increased 16%. The stock has climbed 22% in the last 12 months. It’s shares were up 1.4% in afternoon trading Thursday after the earnings report was released.Union Pacific is one of the nation’s largest railroads, and it operates 32,400 miles (52,000 kilometers) of track in 23 Western states.—————Elements of this story were generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on UNP at https://www.zacks.com/ap/UNP
CSX railroad’s second-quarter profit more than doubled as the economy continued to rebound from the depths of the coronavirus pandemicBy JOSH FUNK AP Business WriterJuly 21, 2021, 9:13 PM• 2 min readShare to FacebookShare to TwitterEmail this articleOMAHA, Neb. — CSX railroad’s second-quarter profit more than doubled as the economy continued to rebound from the depths of the coronavirus pandemic and it hauled 27% more freight than a year ago.The Jacksonville, Florida-based railroad said Wednesday that it earned $1.17 billion, or 52 cents per share, during the quarter. The results included a one-time boost of 12 cents per share related to a $349 million sale of property rights to the state of Virginia.The adjusted results of 40 cents a share topped the average estimate of six analysts surveyed by Zacks Investment Research for adjusted earnings of 37 cents per share.The number of shipments CSX delivered jumped in every category of freight compared to a year ago, when the economy slowed to a crawl because of restrictions related to the pandemic.The freight railroad said revenue grew 33% to $2.99 billion in the period, which also topped Street forecasts. Three analysts surveyed by Zacks expected $2.97 billion.CSX shares gained 3% in after-hours trading Wednesday following the release of the earnings report.—————Elements of this story were generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on CSX at https://www.zacks.com/ap/CSX
Federal regulators say Berkshire Hathaway’s $1.3 billion deal to buy a natural gas pipeline from Dominion Energy that fell apart this week should have never been attempted because a similar deal drew strong opposition in the pastBy JOSH FUNK AP Business WriterJuly 13, 2021, 9:42 PM• 3 min readShare to FacebookShare to TwitterEmail this articleOMAHA, Neb. — Federal regulators say Berkshire Hathaway’s $1.3 billion deal to buy a natural gas pipeline from Dominion Energy that fell apart this week should have never been attempted because a similar deal drew strong opposition in the past.The acting director of the Federal Trade Commission’s Bureau of Competition, Holly Vedova, said Tuesday that the companies involved should have known that the deal was unlikely to get approved because the agency previously opposed a similar combination involving Dominion’s Questar pipeline and Berkshire’s Kern River pipeline.“It is disappointing that the FTC had to expend significant resources to review this transaction when we previously filed suit in 1995 to block the same combination,” Vedova said. “Given our prior action, and the even closer competition that developed between the pipelines since then, this is representative of the type of transaction that should not make it out of the boardroom.”Vedova noted the Kern River and Questar pipelines are the only two pipelines that bring natural gas from where it is produced in the Rocky Mountains to central Utah, so allowing the two to combine would undermine the competition that benefits consumers.Questar has been a part of Dominion since 2016 and Berkshire’s utility division acquired Kern River in 2002, so neither parent company was involved when Questar tried to buy 50% ownership of the Kern River pipeline in 1995.Officials with the utility division of Warren Buffett’s company did not immediately respond to questions about the deal on Tuesday. Dominion officials declined to comment.Berkshire and Dominion announced Monday that they were abandoning the deal because of uncertainty about whether regulators would approve it.Dominion said it plans to find another buyer for its Questar Pipelines unit by the end of the year, and it will refund the $1.3 billion that Berkshire paid to acquire the pipeline after the deal was announced a year ago.Separate from the Questar deal, Berkshire spent $2.7 billion to buy some of Dominion’s other natural gas transmission and storage assets, including over 5,500 miles of natural gas transmission pipelines and about 775 billion cubic feed of gas storage facilities. Berkshire also took on $5.3 billion of the Richmond, Virginia-based Dominion’s debt as part of that transaction.The Omaha, Nebraska-based Berkshire conglomerate owns several major utilities, BNSF railroad, several large insurers including Geico, and an assortment of manufacturing and retail companies as part of a collection of more than 90 businesses. Berkshire also holds sizeable stock investments in Apple, Bank of America, Coca-Cola and other companies.
Canadian National has made its final pitch to regulators for preliminary approval of its $33.6 billion acquisition of Kansas City Southern railroadBy JOSH FUNK AP Business WriterJuly 7, 2021, 5:25 PM• 3 min readShare to FacebookShare to TwitterEmail this articleOMAHA, Neb. — Canadian National has made its final pitch to regulators for preliminary approval of its $33.6 billion acquisition of Kansas City Southern railroad.The Canadian railroad reiterated its main arguments for the deal in a detailed filing with the Surface Transportation Board on Tuesday. Earlier this spring, regulators indicated they would take a cautious approach to approving Canadian National’s plan to set up a voting trust that would acquire Kansas City Southern and hold the railroad during the STB’s lengthy review of the overall deal.More than 2,000 letters were filed with regulators with most of them supporting the deal, but it also attracted strong opposition from rival Canadian Pacific railroad and several hundred commenters who raised concerns about the merger hurting competition. Canadian Pacific lost out on the chance to acquire Kansas City Southern when it refused to increase its original $25 billion bid for the smaller U.S. railroad, but CP has continued to seek STB approval for its combination with Kansas City Southern, so it will be prepared if the CN deal fails to get approval.“We are confident that our voting trust meets all the standards set forth by the STB and believe that, after a fair and thorough review by the STB, it should be approved,” Canadian National CEO JJ Ruest said.Regulators will decide later whether to approve Canadian National’s plan to acquire Kansas City Southern with a voting trust. If it is approved, KCS shareholders would get paid before the STB embarks on its full review. CN’s bid for Kansas City Southern includes $200 cash and 1.129 shares of its stock for every KCS share. The deal also includes about $3.8 billion in Kansas City Southern’s debt.The Surface Transportation Board’s current merger rules haven’t been tested because it hasn’t approved any major railroad mergers since the 1990s. It has generally said that any deal involving one of the nation’s six largest railroads needs to enhance competition and serve the public interest to get approved. The board has also said it would consider whether any deal would destabilize the industry and prompt additional mergers.When the STB initially rejected Canadian National’s voting trust plan on a technicality in May, regulators questioned whether the level of debt Canadian National plans to take on to buy Kansas City Southern would undermine the financial stability of the railroad. Canadian National has said it believes it would remain financially sound after the deal and it would pay down the debt quickly because it has suspended stock repurchases. The STB also requested more details about the merger plan.Canadian Pacific has maintained that allowing CN to buy Kansas City Southern would hurt competition across much of the central United States because those railroads operate parallel rail lines that connect the Gulf Coast to the Midwest. CP officials have also said that CN’s plan would add to rail congestion in the Chicago area, and it would likely inspire other railroads to attempt mergers.Canadian National said it believes it can address the competitive concerns through its operating plan and by selling 70 miles of track between New Orleans and Baton Rouge, Louisiana where Kansas City Southern’s network directly overlaps with CN’s tracks. Canadian National said that after the merger it would also maintain its connections with other railroads to allow customers to ship goods using a combination of different railroads if they choose to.
Investor Warren Buffett said the economic impact of the pandemic remains hard to predict but most big companies have fared OK throughout it as long as they weren’t tied to travelBy JOSH FUNK AP Business WriterJune 30, 2021, 4:42 PM• 4 min readShare to FacebookShare to TwitterEmail this articleOMAHA, Neb. — Billionaire Warren Buffett says the one constant throughout the coronavirus pandemic has been that it has been difficult to predict how it would affect the economy, but clearly it has devastated many small businesses and individuals while most big companies have fared OK.“The economic impact has been this extremely uneven thing where I don’t know how many but many hundreds of thousands or millions of small businesses have been hurt in a terrible way, but most of the big, big companies have overwhelmingly have done fine, unless they happen to be in cruise lines or, you know, or hotels or something,” Buffett said in an interview that aired on CNBC Tuesday night.Buffett and Berkshire Hathaway Vice Chairman Charlie Munger touched on a variety of topics during the interview. Munger said China had the right approach to the pandemic by essentially shutting down the country for six weeks.“That turned out to be exactly the right thing to do,” Munger said. “And they didn’t allow any contact. You picked up your groceries in a box in the apartment and that’s all the contact you had with anybody for six weeks. And, when it was all over, they kind of went back to work. It happened they did it exactly right.”Munger also praised the financial regulations that Chinese regulators have put in place. For instance, he said China was right to clamp down on Ant Group, which is affiliated with billionaire Jack Ma’s Alibaba Group, when it forced the giant online payments firm to become a financial holding company that will be regulated more like a bank.“I don’t want … all of the Chinese system, but I certainly would like to have the financial part of it in my own country,” Munger said.Buffett and Munger both said U.S. regulators should do more to restrict the amount of gambling in financial markets by limiting the how much investors and banks can borrow on margin. They said that over the years Wall Street has found ways around the limits established after the Great Depression that the Federal Reserve put on how much people could borrow against stocks.Having tougher rules on the amount of leverage investors can use would help avoid problems like the $5 billion charge Credit Suisse took this spring when American hedge fund Archegos Capital defaulted on margin calls, which are triggered when investors borrow using their stock portfolio as collateral and have to make up the balance required by banks when the share prices fall and the collateral is worth less.“We learned a long time ago … that you can’t make a good deal with a bad person. Just forget it,” Buffett said. “Now, if you think you can draw up a contract that, that is going to work against a bad person, they’re gonna win.”Munger said a number of companies acted foolishly in their dealings with Archegos “but Credit Suisse has managed to be the biggest fool of all.”Buffett and Munger also reiterated their criticism of the Robinhood brokerage because they said it is encouraging average investors to speculate on stocks with options instead of making long-term investments.“It’s a gambling parlor masquerading as a respectable business,” Munger said.Robinhood has defended its practices in the past and said it is helping more people become invested in the markets.The Omaha, Nebraska-based Berkshire Hathaway conglomerate that Buffett and Munger lead owns more than 90 companies, including Geico insurance, BNSF railroad, a number of major utilities and an assortment of manufacturing and retail firms. Berkshire also holds major stock investments in Apple, Bank of America, Coca-Cola and several other companies.
Warren Buffett’s Berkshire Hathaway conglomerate is still aggressively buying back its own stock to make use of some of its huge pile of cashBy JOSH FUNK AP Business WriterJune 24, 2021, 9:21 PM• 2 min readShare to FacebookShare to TwitterEmail this articleOMAHA, Neb. — Warren Buffett’s Berkshire Hathaway conglomerate is still aggressively buying back its own stock to make use of some of its huge pile of cash.Berkshire has repurchased roughly $6.5 billion of its own shares so far in the second quarter. That follows $6.6 billion of repurchases in the first three months of the year and roughly $25 billion in repurchases last year.The latest repurchases were revealed Wednesday when Buffett filed an update on his Berkshire holdings after he donated $4.1 billion worth of stock to five foundations he supports with annual gifts. Edward Jones analyst Jim Shanahan noted the filings showed there were now fewer shares outstanding than there were when Berkshire filed its first-quarter earnings report.Berkshire has turned to repurchases in recent years as a way to make use of some of its roughly $145 billion pile of cash as Buffett has struggled to find major acquisitions for the company. And Buffett has long opposed paying a dividend at Berkshire because he believes the money will be worth more if it is reinvested by the company instead of being paid out to shareholders.Shanahan said Berkshire’s cash pile should shrink a bit during the second quarter because of the repurchases and other investments the company has disclosed recently.The Omaha, Nebraska-based conglomerate owns more than 90 companies outright, including Geico and several other insurers, major utilities, BNSF railroad and an assortment of manufacturing and retail businesses. Berkshire also holds major stock investments in Apple, Bank of America, Coca-Cola and other companies.