Not only that, they are quietly closing Denver's Burnham shops as of Dec 21st.

Long the Rio Grande's heavy maintenance shops for over 100 years. The engine work will be at either North Little Rock or North Platte. After the last Alco diesels were gone in the late 60's Burnham was EMD only. After the UP took over in the late eighties most GE diesels were serviced there. The gates will be locked and shop personal gone. Don't know many more details as of yet.

The nation's second largest rail road? Does that mean BNSF is now in the top spot? I thought UP was still a bit larger than BNSF? It did still sound like UP was in pretty good condition financially.

Hopefully it will get better for them soon so they can put their people back to work. I have been through a layoff many years ago (not the rail road) when I was just starting out, it's pretty scary worrying about when (or if) you will get called back to work or when to start looking for a different job altogether.

Congress passed an extension to the PTC deadline back in late October.  If this article was just written within the past few days, someone desperately needs to double check their info.

Curt

Interesting story thanks for posting about the UP. I do not understand this economy of ours its not so clear cut as it once was; years of economic stagnation. The Economic picture is not as rosy at all, when I read something like this.

Actually, I think we have had about six years of expansion, and I think the stock market has doubled since 2008.  Some wag on a business channel said our average expansion period postwar is five years, followed by a recession.

Up, down. Up, down.

It will bounce back. BNSF has a few thousand people laid off as well. A big reason is because the railroads highly over estimated the increase in business from last year to this year. Those numbers didn't happen.

For example... for the month of October, the A Yard in San Bernardino, CA set all all time lift record for the yard since it became an intermodal yard in the mid 90's. Volume was the highest it had ever been, yet for the year, it was not even close to what had been predicted and budgeted for. 

Unfortunately we have so many people laid off now and it's peak season. It will get worse come Jan and Feb, before it gets better..... but it will come back.

I own a humble 100 shs of UNP.....and it wasn't that long ago that the stock was doing incredibly well.  So much so that it almost seemed invincible to some degree....and the next split was right around the corner.  Not so.  The economy will always ebb and flow, so to speak.  (Heck....last year saw record profits for UNP)

Politics aside, Washington DC has essentially killed the coal industry....and the shipment thereof.  The drop in gas prices has really hurt the oil and gas industry here in the US......and the steel industry which was supplying it.  (Some of my clients in the Trucking Industry have seen business materially drop simply due to decreased steel shipments.)  And somehow, China simply slowing down its economic growth trickles down to the rest of the world these days.

It's always more fun to be on the upswing than the down, but that's the way business goes.

As an aside, many economists use rail traffic as a bell weather for the U.S. Economy as a whole......and we should all be concerned, to some degree.  Or at least realize what is hanging over our heads.

I have 2 measly stocks one is unp and the other is a company cleco  I picked up cleco when my mom passed it was just a fraction of a share when she sold off all her stock for cancer treatment. and a fraction of cleco was left. so as of last year I started buying unp stock and have been buying cleco for years I was thinking of selling off most of the cleco and buying stock in unp with the money but kind of scared to do it now with the price dropping so much when I started buying it was one month after the split Bad timing I had planned on buying about 6 months before I did oh well. I want to say price after the split was something like 101 per share then it went all the way up to 123 a share I think and last I checked it was $77.00 wondering if I buy now would it be a smart move still

Unfortunately we are laboring through a banking induced downturn in the economy.  Harvard professors Rogoff & Rhinehart, authors of "This Time is Different", which studied 200+ years of economic downturns, depressions and panics, found that banking inspired crashes resulted in 10 to 20 years of weak economy. We're now about 7 years out from the crash of 2008.  Even the strongest companies, such as Union Pacific, have been bounced around. Keep your seatbelts fastened, we're not through it yet!

Like trucking or ships, it is a cyclical business.

at least one stat i enjoyed seeing is hopefully less coal being hauled to power plants or worse, on its way to China.

As stated in the linked article, cheaper natural gas prices are the biggest cause of the decline in coal, it is not Washington D.C. The utilities go where they can get the cheapest fuels and natural gas is cheap right now. Gasoline prices are a bit puzzling?

UP earnings still beat expectations, their condition can't be all that bad. They were just a little behind last year's figures. I also think they did a lot of over hiring last year due to the backlog and I think weather had a lot to do with that one. I agree with Laidoffsick, things will comeback for the rail roads. I think they still pretty healthy overall.

The part of the article that looked the worst to me was the downturn in housing. I don't think that is a good sign, but it could be just a seasonal adjustment?

HOLD your Union Pacific. It offers a very good dividend and it is primarily an oil price downturn.

Things will improve and by the end of next year it will be $95+

Here's the low down on coal:  B/c of numerous regulations, it's very expensive to close a coal mine.  Three companies continue to mine coal (globally) even though it costs them more to mine the coal then they will sell it for.  They "lose" less money this way then by closing the mine....or say they claim.  They are essentially saturating the market (which is already very weak) for every one else by doing this....and it's dragging many companies down with it.

But make no mistake about it:  Whether you agree with it or not, this is exactly what the Obama Administration wanted to happen to coal.  BO has numerous quotes where he has said...and I paraphrase:  "We're not going to make mining coal illegal.  But we will make it so expensive to do so that you'll lose money in the process and be forced to stop mining coal."

Mission accomplished.

CSX, NS and now UP closing yards and laying off folks - wow - a few months back they did not have enough staff or equipment.

As Dylan says "Times, they are a changin"

Buy low and sell high - take a good look at the US Economy and the Fortune 500 - they always grow. The last 10 years the market is up so equities - stocks are the way to go . Better off owing mutuals that one single stock - Eggs all in one baskest maximize your risk exposure

Swafford posted:

Union Pacific: As profits sink and furloughs rise, it's uncertain times ahead for the railroad

http://www.omaha.com/money/uni...VmESWfWWW8M.facebook

 

Investors and analysts.

Concern is mounting because Union Pacific on Thursday reported that third-quarter net income fell to $1.3 billion, or $1.50 a share, from $1.37 billion, or $1.53 a share, a year earlier. The earnings per share beat the average Wall Street analyst estimate of $1.43. Revenue dropped 10 percent to $5.6 billion.

Despite the worry on declining shipments, investors rushed into Union Pacific stock on Thursday. Shares of Union Pacific rose 3.85 percent on the day, or $3.60, to close at $97.01 each on the New York Stock Exchange. The shares had fallen around 18 percent so far this year through Wednesday, the day before the third-quarter earnings were released.

Berkshire President posted:

Here's the low down on coal:  B/c of numerous regulations, it's very expensive to close a coal mine.  Three companies continue to mine coal (globally) even though it costs them more to mine the coal then they will sell it for.  They "lose" less money this way then by closing the mine....or say they claim.  They are essentially saturating the market (which is already very weak) for every one else by doing this....and it's dragging many companies down with it.

But make no mistake about it:  Whether you agree with it or not, this is exactly what the Obama Administration wanted to happen to coal.  BO has numerous quotes where he has said...and I paraphrase:  "We're not going to make mining coal illegal.  But we will make it so expensive to do so that you'll lose money in the process and be forced to stop mining coal."

Mission accomplished.

No problem. We're going to power everything off of unicorn flatus. Problem solved.

Berkshire President posted:

Here's the low down on coal:  B/c of numerous regulations, it's very expensive to close a coal mine.  Three companies continue to mine coal (globally) even though it costs them more to mine the coal then they will sell it for.  They "lose" less money this way then by closing the mine....or say they claim.  They are essentially saturating the market (which is already very weak) for every one else by doing this....and it's dragging many companies down with it.

But make no mistake about it:  Whether you agree with it or not, this is exactly what the Obama Administration wanted to happen to coal.  BO has numerous quotes where he has said...and I paraphrase:  "We're not going to make mining coal illegal.  But we will make it so expensive to do so that you'll lose money in the process and be forced to stop mining coal."

Mission accomplished.

I read last week that the last coal mine in the UK was just closed.  The article said it was cheaper to import coal than to mine it in the UK.  The last mine was a deep shaft mine that was expensive to operate.

Coal has always been a very expensive fuel in terms of danger to the miners, pollution, disease and environmental damage.  These costs aren't always taken into account when people talk about the industry because they are borne by individuals, their families and society as a whole.  Black lung disease  and mine accidents are not pretty.  Polluted air, mountains and rivers are not pretty and the cleanup costs are very expensive.

The UK, just like most advanced countries, is switching to other fuels.  Even China is beginning to switch to alternate fuels because of air pollution.  

I think that we will see most coal use gone within the next 20 years except for metallurgic coal used to make steel.  The decline in coal's use worldwide has little to do with politics and everything to do with the development of alternate and cleaner sources of energy.

NH Joe 

As power plants are forced one way or another to convert to natural gas I can't wait to see how much it will cost to heat by natural gas or propane and to fill the barbeque grill.

Here in Alberta we depend on the railways to move a lot of our oil because no one wants a new pipeline.

As far as coal goes, we have billions of tons of it., mainly for export but our gov't here has decided to CLOSE DOWN ALL the coal fired power plants (60% of our electricity production) by 2030. That is only 15 years from now. With the power plant closed the only market for our coal is CHINA._ So probably 1 or 2 mines will stay open out of about 8 of them.

The railways here, CP and CN get a lot of income from the coal.

NHJoe:  I hear and agree with what you're saying.

But if the Fed government is essentially making it impossible for companies to mine coal, shouldn't they at least help pay or offset the cost of closing the mines?  In other words.....put their money where their legislative mouths are?

I completely understand the reasons for not wanting to mine as much coal.  But three companies are literally flooding the global market even though they're losing money in the process.  It really seems short sighted to me.  Obviously, US laws can only effect US coal mines.  But if our government's desire is for these mines to be closed, I (personally) think they should be more cooperative (and share some of the $$$ burden) of closing the mines.....FWIW.

Berkshire President posted:

........But if our government's desire is for these mines to be closed, I (personally) think they should be more cooperative (and share some of the $$$ burden) of closing the mines.....FWIW.

Try to convince the Republican-controlled Congress to pony up some tax money to pay for this. Good luck with that. 

Union Pacific: As profits sink and furloughs rise, it's uncertain times ahead for the railroad

That headline could have been (and has been) written dozens of times over just the past 20 years.

Working in the financial industry, one of the things you should be aware of is that the role of stock price has changed tremendously from generations past, stock price means a whole lot more then it once did. For example, the heads of companies a generation ago made their compensation in cash compensation, which generally was in the form of salary and cash bonuses. These days, most executives get the bulk of their compensation in the form of stock grants (not even stock options, but rather restricted stock grants). When you read about CEO's making 50 million a year, most of that is in stock grants. 

Likewise, in the past with stocks a significant percent of the return on investment for investors was in things like dividends, today for most stocks dividends, if they exist, are a small part of the formula. Stocks also trade very differently, a large percentage of stock transactions take advantage of small fluctuations on stock price (institutional investors, like pension funds, trade differently, they trade for the long term)

What this means is that companies and the big investors are a lot more concerned about short term stock price, and the executives of companies often focus on the stock price as the only real measure of the company's worth (which isn't always a positive, but that is not on topic here).  What it does mean is that when something happens, like a downturn in quarterly profits, it can really hammer the stock, and one of the things that affects stock price is how the company deals with it. In the face of downturns like this, which in terms of the broader history of the company is short term, one of the best ways (sadly IMO) is to lay people off and cut costs in doing so. Stock prices are basically determined by what stock analysts say, and stock analysts don't care about the long term, they don't care that a company is well positioned, they care about the immediate future, and cutting people basically makes them very happy..it is one of the reasons UP stock was bought into, because analysts saw the executives taking action to cut costs, and they responded. 

As far as why this is happening to UP, I would bet it is a combination of factors but the biggest I think is the plunge in oil prices. The railroads were making a lot of money shipping the oil being generated by fracking, plus coming in from Canada. At 35 bucks a barrel or so, fracking and tar sand oil just don't pay to produce, so production is being curtailed, and that is cutting into a prime source of shipping revenue. In theory, the cheap price of oil should be spurring the economy, but it is a mixed bag, some people are definitely doing better (for example, sales of SUV's and trucks are at a high level), but that takes time to translate into more shipping of cars and auto parts, so it doesn't make up for the UP losses in oil shipping I would guess.

China's slowdown also affects this. While China doesn't buy much actually made here, they buy a lot of commodities from here other than oil, and those have slowed down, too. You add that up, and Eliot is right, this is likely a cyclical downturn, not a harbinger of the overall economy (not that I am arguing that the economy is necessarily doing all that great). 

As far as coal goes, the trend away from coal has been happening for a long time, other than in the midwest, most power in this country has been generated by natural gas for a long time, coal has been declining for many decades. It is dirty, even leaving out the CO2 emissions, sulfur emissions continue to be a problem, and coal fired power plants have significant expense with maintainence and repair that you don't have with natural gas, natural gas fired plants among other things are a lot more efficient than coal fired ones. Claims about 'clean coal' are mostly an advertising gambit, and that leaves out the environmental damage that coal mining does, the pollution of rivers and lakes and the ugly, torn up countryside it leaves, and not even going to talk about the toll on coal miners.

The only reason coal has lasted as long as it has as a fuel is government policy, coal companies were shielded from example with the cost of their operations and were not required to maintain escrow accounts to clean up the mines after they shut them down (in the old days, they simply walked away after boarding up the mine). Economically coal stopped making sense a long time ago, the claims back in the 1970's that coal was the answer to energy shortages and getting dependence off of foreign oil turned out to be nothing more than hype (for example, they talked of making natural gas and gasoline out of coal, which you can do; the problem is that it was so expensive it made no sense).It basically lasted on due to government subsidies, and  in recent decades because third world countries like China and India use it, though those countries mine a lot of their own coal so the impact was relatively small. Coal as an energy source makes about as much sense as going back to steam engines on the railroads, more nostalgia then reality.

There is a lot of natural gas reserves in the world, probably enough to be a stop gap to new energy sources that eventually are going to happen. A company in Australia, for example, has developed a commercially successful 'artificial' leaf that can produce hydrogen, which could replace natural gas, and there has been serious work on synthesizing gas and oil from algae (which has the added advantage that is carbon neutral), and it is likely other things will come in that will replace oil and gas drilled from the ground. Not to mention that coal as a backup won't do much good, when you convert a powerplant from coal to natural gas, you cannot burn coal, and coal cannot be used for transportation or for heat and such in houses and businesses, converting back would be impossible. Coal in many ways is as dead as the dinosaurs that helped create it and has been a dead man walking for many, many years.

They are switching my local power plant from coal to natural gas with the possibility to switch back to coal . They know things could change . Google Shawville power plant if interested . They say it could be a very easy switch .

I know it was stated earlier but I just can't wait to see what the price of gas will be in a few years.....uh boy...

Several posters have said that three companies are "flooding" the world market with coal.  I did a Google search.  The only thing that I could find about "flooding" the world market was for metallurgic coal.  Here is a quote from the Wall Street Journal.

"SYDNEY—Miners are shoveling more metallurgical coal onto a global market already awash with the steelmaking commodity, delaying any recovery in prices that are at multiyear lows."

Another article discussed shutting down coal mines in Australia.  Those mines are producing metallurgic coal.  

I don't know what percentage of U.S. railroad hauled coal is metallurgical but I expect that it is a lot less than power plant coal.  It appears that shutting coal mines is a worldwide trend as the world moves to new energy sources.  There was a report on the CBS morning news that Iceland is totally green when it comes to energy.  Iceland uses thermal and hydroelectric power and is developing wind power.  Most countries including the USA do not have enough thermal or hydroelectric power to meet all needs but the trend toward using clean energy will continue. 

The challenge for coal producing regions, both here and abroad, is how to retrain a work force that has been dependent on coal for over 200 years.  It is scary prospect for families who have been dependent on coal and coal related jobs (railroads, etc.) to have to learn new skills and perhaps relocate to where the new jobs are available.  It is perfectly understandable why people are afraid and upset. 

I live in the SF Bay Area.  The economy is booming and tech firms are looking for and hiring qualified candidates at very well paying salaries.  Unfortunately, these companies (Apple, Google, Facebook, Yahoo, etc.) often find their candidates from foreign countries where the education systems concentrate on math, science and computing.  It is too bad that the education systems in some of our coal producing regions do not seem to be graduating huge numbers of students with math, science, and computer degrees who are able to compete for these jobs.

NH Joe

Coal does have one advantage.  If the rail line has a disruption, there is a stockpile of coal you can use.

What happens if that natural gas pipeline has issue.  Plant shuts down.

We as a nation should consider this after Paris attacks.

Dominic Mazoch posted:

Coal does have one advantage.  If the rail line has a disruption, there is a stockpile of coal you can use.

What happens if that natural gas pipeline has issue.  Plant shuts down.

We as a nation should consider this after Paris attacks.

Oh come on, get real!!!!!

bigkid posted:

Working in the financial industry, one of the things you should be aware of is that the role of stock price has changed tremendously from generations past, stock price means a whole lot more then it once did. For example, the heads of companies a generation ago made their compensation in cash compensation, which generally was in the form of salary and cash bonuses. These days, most executives get the bulk of their compensation in the form of stock grants (not even stock options, but rather restricted stock grants). When you read about CEO's making 50 million a year, most of that is in stock grants. 

 

Likewise, in the past with stocks a significant percent of the return on investment for investors was in things like dividends, today for most stocks dividends, if they exist, are a small part of the formula. Stocks also trade very differently, a large percentage of stock transactions take advantage of small fluctuations on stock price (institutional investors, like pension funds, trade differently, they trade for the long term)

What this means is that companies and the big investors are a lot more concerned about short term stock price, and the executives of companies often focus on the stock price as the only real measure of the company's worth (which isn't always a positive, but that is not on topic here).  What it does mean is that when something happens, like a downturn in quarterly profits, it can really hammer the stock, and one of the things that affects stock price is how the company deals with it. In the face of downturns like this, which in terms of the broader history of the company is short term, one of the best ways (sadly IMO) is to lay people off and cut costs in doing so. Stock prices are basically determined by what stock analysts say, and stock analysts don't care about the long term, they don't care that a company is well positioned, they care about the immediate future, and cutting people basically makes them very happy..it is one of the reasons UP stock was bought into, because analysts saw the executives taking action to cut costs, and they responded. 

As far as why this is happening to UP, I would bet it is a combination of factors but the biggest I think is the plunge in oil prices. The railroads were making a lot of money shipping the oil being generated by fracking, plus coming in from Canada. At 35 bucks a barrel or so, fracking and tar sand oil just don't pay to produce, so production is being curtailed, and that is cutting into a prime source of shipping revenue. In theory, the cheap price of oil should be spurring the economy, but it is a mixed bag, some people are definitely doing better (for example, sales of SUV's and trucks are at a high level), but that takes time to translate into more shipping of cars and auto parts, so it doesn't make up for the UP losses in oil shipping I would guess.

 

Re: short term thinking,  CEO compensation and analysts.

And ...so what? If you have the right out look you can use this to your advantage, if you are a long term investor.

re: dividends

divdends absolutely remain a very important part of investing returns

My UNP has YOI from the dividend of 18.61%/year and it will probably increase again next year.

Intersest read on UNP.

http://www.up.com/aboutup/comm...ty_ties/longrail.htm

I thought you owned enough stocks of a company/companies so you could live off the the dividends, not on what the stock is worth.  But dividends are based on PROFIT, which some might consider a dirty word.

Dominic Mazoch posted:

I thought you owned enough stocks of a company/companies so you could live off the the dividends, not on what the stock is worth.  But dividends are based on PROFIT, which some might consider a dirty word.

Not all companies pay dividends, and dividends generally tend to be more common in certain sectors of the economy, dividends are not common in the tech center, but old line conglomerates like GE pay a dividend, as does UP, utilities and so forth. I don't know what percent of companies pay dividends, but I know that a relatively large percent don't. 

The other thing you have to keep in mind is that while buying stocks to get a dividend is popular for people looking for regular income (the same way bonds are thought of), such as retirees, in the broader context of stock trading these days dividends are not the major focus of much trading or in what they are looking for, they are looking more at stock price as the major component of returns. 30 years ago or before dividends were a big deal and dividend focused trading was a significant portion of the markets, today it no longer is, as the focus has shifted from long term investing with dividend return to short term gains. There are all kinds of myths around stocks that pay dividends, that their stock price is more stable, that they weather bad economies better than stocks that don't, but they are just that, myths. Dividends are also tax friendly, they have the 15% tax rate on them, whereas with a stock you have to hold the stock for a year to get that rate if you sell them. 

In terms of returns, a lot more people invest in mutual funds and index funds, whose returns are based on the price of the stocks in them, the last I checked the average individual stockholding in the US is around 1000 dollars, which won't generate a lot of dividends, and that is dwarfed by holdings in things like 401k's and IRA's and mutual funds and such.

PSU1980 posted:

Decline in coal is directly related to the Obama Administration policy being enforced by an out of control EPA to eliminate fossil fuels and reduce green house gas emissions. Destroy an industry, destroy the lively hood of Americans in the coal belt. 

Sad day for all,

This is typical of the myths that are out there, that claim that coal is being killed because of the hoopla around global warming, that coal was doing just fine until Obama hit the white house, and it is like a lot of things out there passing as fact, it is myth. The primary use of coal (outside specialized use in things like metalurgy, smelting and steel production) was in power generation. In that regards, coal has been dying for many, many years, in the more populated regions coal fired power plants have been replaced by natural gas fired plants over the last 40 years, and now in the midwest and south where coal fired plants are still common, the same thing is happening. It isn't an out of control EPA, it is that because of the abundance of natural gas and the creation of the pipelines that have been built, it makes economic sense to use natural gas. The primary user of natural gas is not home heating or cooking or dryers, it is in power generation. In the long run, coal is a lot more expensive than natural gas, gas fired power plants are more efficient and clean burning, so the plants don't need as much of the scrubbers and such to keep the plants from dumping soot and crap all over the country (those nice tall smokestacks are kind of a nice touch, it allows the stuff they spew out to affect 3, 4 states down the line). Natural gas doesn't have sulfur in it, the chief reason for acid rain that has wreaked havoc many states away from the plant, and it also doesn't leave ash that is quite toxic and needs to be safely disposed of, which is expensive.

What happened to coal had nothing to do with Obama or any one administration, what killed coal is that it no longer makes economic sense as a fuel, it is dirty, its mining is dangerous, environmentally is a disaster area and often leaves behind serious problems, like towns collapsing or the infamous mine fires that burn for decades, not to mention the big piles of slag that ruin the landscape and also tend to leach toxic crap into rivers and streams and drinking water. It is funny how people talk about the power of the marketplace, that if something is archaic or obsolete it should be allowed to die, but they have been propping coal up for a long time, now, whether it is favorable tax breaks, or spending billions of dollars on 'clean coal' research that so far has basically figured out that coal's time is done.  We would be better spending that money towards helping develop an alternate economy for the coal producing regions,rather than trying to prop up something whose time is finished. 

Bigkid,

Better than 80% of the S&P 500 pay dividends.

 Comparing a fixed interest rate bond to stock in a company, that has a long term view to reward shareholders via dividend increases, completely misses the power of dividends. 

By way of example, UNP has increased the dividend an average of 18%/year for 15 years. It is not alone.

What traders or money managers do, does not preclude an individual from getting reasonable rates of return.

Big Kid: flawless analysis.

PSU1980 posted:

Decline in coal is directly related to the Obama Administration policy being enforced by an out of control EPA to eliminate fossil fuels and reduce green house gas emissions. Destroy an industry, destroy the lively hood of Americans in the coal belt. 

Sad day for all,

I concur with what BigKid wrote above about coal.  It is easy to blame the Obama Administration and the EPA but this blame is misplaced.  Coal just doesn't make economic sense for power plants anymore and its mining and burning causes significant harm to both miners and the environment.  This change will continue no matter who is in the White House.

Coal producing regions throughout the world are going to have to transition to a new economic model.  This will be a gut wrenching change for the people whose lives were built around the coal industry.  The people in the coal producing regions will need to figure out what their next move will be because their lives will be changed by forces beyond what they or any politician can control.

NH Joe 

According from what I have been reading in TRAINS, coal loads have been going south for a few years.  

Anyway, were there some pollution laws and measures which were place into law by SENIOR Bush?

Big Kid: You call it perfectly!  I couldn't agree more.