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Union Pacific: 2015 Growth Strategy Relies on Capex


Jul. 23 2015, Updated 12:05 p.m. ET

Capital program

Union Pacific (UNP) plans to invest $4.2 billion in 2015, after having invested $4.1 billion in 2014. The company continues to invest in the safety and resiliency of its network, including more than $1.8 billion in infrastructure replacement programs.

Its capital program also allows for continued investment in service, growth, and productivity, primarily in the southern region of the network. Meanwhile, corridor strategies to reduce bottlenecks across the system will also see investment.

The rail industry is required to install positive train control, or PTC, by the end of 2015. Union Pacific has already invested approximately $1.7 billion of ~$2.5 billion required to complete this task.

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Operating outlook

Overall pricing remains competitive for freight, especially in the Western United States, where Union Pacific competes with Berkshire’s (BRK-B) BNSF Railways. Berkshire Hathaway, with its considerable resources, is making sizeable capital investments to develop BNSF’s infrastructure.

Union Pacific is moving toward an agile and focused cost structure, higher productivity, improved network performance, and greater safety measures to keep losses to a minimum. These steps will help the company grow net profits in the double digits over the next couple of years.

Over the past 12 months, Union Pacific has spent a total of $4.1 billion on capital expenditures to boost its infrastructure. Here’s how other companies compare in terms of capital expenditure:

  • CSX (CSX) – $2.57 billion
  • Norfolk Southern (NSC) – $2.13 billion
  • Kansas City Southern (KSU) – $976 million
  • Genesee & Wyoming (GWR) – $326 million
  • Canadian Pacific Railway (CP) – $1.32 billion
  • Canadian National Railway (SNI) – $2.22 billion

Together, these companies form 7.59% of the Industrial Select Sector SPDR Fund (XLI).


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