Union Pacific Corporation
) recently introduced "Arrowedge," an aerodynamic fuel and
locomotive technology that reduces emissions from double-stack
intermodal freight trains. With the latest technological
development, the company expects to enhance fuel efficiency on
its locomotives, ultimately resulting in improved costs.
Union Pacific currently holds two patents for this new
technology in the U.S. and is awaiting additional patents in the
U.S. and Canada. Over the near term, the company expects to
utilize Arrowedge in its double-stack train service between
Joliet, IL and Long Beach, CA.
We believe the company is progressing well on its operating
and productivity improvements. As a result, management expects
operating ratio to decrease to 65% by 2017.
We believe the company has opportunities to improve yields
backed by a higher rate of contract re-pricings compared to its
Class I peers and increased access to West Coast intermodal
business and energy related markets. Apart from strengthening its
network operation, the company also focuses on customer
satisfaction level, which was an impressive 93% in the second
Further, the company has also accelerated its investment plans
so as to support its growth goals in network infrastructure.
Union Pacific remains committed to make long-term investments of
about 17-18% of total revenue over the next several years,
supporting operating efficiencies, growth and returns.
For 2013, the company expects to invest about $3.6 billion
with more than half of the investments targeted toward
infrastructure replacement and enhancement of commercial plants.
The company aims to invest nearly $1 billion in service growth
and productivity projects. Management will put in approximately
$450.0 million on positive train control.
One of the major ventures of the company is the Santa Teresa
unit in New Mexico that is expected to be completed by early
2014. Union Pacific also targets the purchase of 100 new
locomotives and 900 freight cars during the year to serve the
domestic market, supporting growth of the industrial segment. We
believe that these investments would boost the company's
long-term efficiency and service capabilities.
Union Pacific, which operates with other railroad company -
Norfolk Southern Corp.
Canadian Pacific Railway Ltd
) - currently retains a Zacks Rank #3 (Hold).
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