If you leaned down and placed your ear on the track, you could hear the momentum building for Union Pacific
The iconic railroad enjoyed the most profitable year in its proud 150-year history, delivering net earnings of $6.72 per diluted share for a 22% increase over 2010. Although boosted by the hauler's $1.4 billion binge of share repurchases during the year, the excellent result is a continued byproduct of flawless operations, massive infrastructure investments over the last decade, and moderate demand improvement across multiple freight categories.
I have stood in childlike awe of the North American railroads throughout this economic downturn, and Union Pacific's superb fourth quarter drops my jaw to the floor yet again. It may sound impossible, but Union Pacific absorbed a 28% year-over-year increase in average diesel-fuel prices during the fourth quarter, and yet still managed to boost earnings per share by the same 28% (with only a 3% increase in volumes hauled!). Combining an effective system of fuel surcharges with resilient demand, the railroad industry at large continues to avoid the margin squeeze that can assail other portions of the industrial economy in a rising-cost environment. For a recent example, have a glance at Schnitzer Steel's latest result. As defensive long-term investments to weather challenging business cycles, the North American railroads have proven their value in spades! Have a look at the following five-year chart:
I thought Norfolk Southern
Fool contributor Christopher Barker can be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He tweets. He owns no shares in the companies mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.