All Aboard! Trading Union Pacific's Earnings Report (CSX, NSC, UNP)

The rails are really moving, aren't they? Union Pacific UNP just reported fourth quarter earnings of $1.56 per share on revenues of $4.36 billion, which was better than expected. Wall Street had expected earnings of $1.44 per share on revenues of $4.36 billion. “Our strong fourth quarter results are indicative of the great performance we've achieved throughout 2010, setting numerous records as we report the most profitable year in Union Pacific's nearly 150-year history,” said Jim Young, Union Pacific chairman and chief executive officer. “As business volumes increased during the year, we kept our customer commitments by ensuring consistent, safe and reliable service. Shareholders also were rewarded as we completed strategic investments designed to further improve financial returns, increased the quarterly dividend more than 40 percent, and repurchased nearly $1.25 billion in shares.” Young was positive on 2011 as well. “As we look ahead to 2011, we are encouraged by signs of a slowly strengthening economy,” Young said. “Union Pacific is well-positioned to serve the total transportation needs of our customers as we focus on becoming a more fully integrated part of our customers' supply chains. Excellent service is the key to our future success, supporting our pricing initiatives and helping us improve asset utilization. This strategy will enable us to further increase our overall profitability, invest for the future, and drive strong shareholder returns.” The strength in the quarter, was chemicals, industrial products, intermodal, and agriculture. We even saw automotive volumes rise, a strong sign for companies like Ford F and General Motors GM. I would expect Union Pacific's competitors, like CSX CSX, and Norfolk Southern NSC to report similar numbers and say similar things about the quarter, as well as 2011. Another way to play it is to buy Berkshire Hathaway BRK, as it owns Burlington Northern Santa Fe, which Warren Buffett called his "all in" on the U.S. economy. It looks like we're starting a correction here, so if you don't have a position in these names, you probably could get them a little cheaper, but I wouldn't expect much cheaper, tops 5%. I would expect 2011 to be another strong year for the rails, and as oil prices continue to climb, it's all aboard the rails, and happy shareholders to come.