Union Pacific, one of the major freight railroads that successfully fought union demands for paid sick days for workers during contentious labor negotiations in 2022, reported another year of record profits on Tuesday.
The company, along with CSX, Norfolk Southern and Burlington Northern Santa Fe, narrowly avoided a strike by its union workers when Congress imposed new contracts on about half of its union members in December.
During the year, the company’s employee pay and benefits increased by approximately $500 million, or 12%, to $4.6 billion, far less than the $6.3 billion Union Pacific spent on stock buybacks.
“Instead of buying back its own stock, UP should invest in its employees by providing paid sick leave, reasonable hours and a better quality of life for railroaders,” said Ed Hall, new president of the Brotherhood of Locomotive Engineers, the union. of engineers. . “This is the only way the railroad will be able to solve its hiring and retention problems and keep the trains running.”
Hall was working as an active engineer at the company in December before assuming the union’s top job.
The new labor contracts gave its employees an immediate 14% pay increase, including back wages. But many of the unions opposed the agreements because they did not provide members with the paid sick days they sought. Even the unions that voted to ratify the agreements had a significant portion of rank-and-file members who voted against.
Not all of those contract costs affected Union Pacific’s fourth-quarter results reported Tuesday. Some costs, mainly those related to retroactive payments, were recorded as an adjustment to past results. And the signing bonuses for union members that were paid in January will appear when the company’s first-quarter results are reported in April.
Still, the higher labor costs did not have much of an impact on the railroad’s profitability. Raised Fuel costs were a much bigger hit to earnings than wage increases, rising $1.4 billion, or 68%, to $3.4 billion.
For the year, the company’s net income rose to a record $7 billion, roughly $500 million, or 7%, from the previous record profit it posted for 2021. While general operating expenses for 2022 increased $2.5 billion, that was surpassed by increased revenue. $3 billion to a record $24.9 billion for the year.
Fourth quarter results were slightly weaker than expected, as net income fell 4% from a year earlier. The railroad attributed much of that decline to higher operating expenses from a bad winter across much of its service area in December. UP shares fell nearly 3% by midafternoon.
Two other major freight railroads, CSX (CSX) and Norfolk Southern (NSC), are due to report results on Wednesday. Both are expected to report improved fourth-quarter and full-year earnings. The fourth largest freight railroad, Burlington Northern Santa Fe, is a wholly owned subsidiary of Berkshire Hathaway (BRKA), which has yet to schedule its fourth-quarter earnings release.