Union Pacific, one of the major freight railroads that successfully fought off union demands for paid sick days for workers during contentious labor negotiations in 2022, reported another year of record earnings Tuesday.
The company, along with CSX, Norfolk Southern and Burlington Northern Sante Fe, narrowly avoided a strike by its unionized workers when Congress imposed new contracts on about half of its union members in December.
For the year, the company’s employee pay and benefits rose by about $500 million, or 12%, to $4.6 billion, far less than the $6.3 billion that Union Pacific spent repurchasing shares of stock.
“Instead of buying back their own stock, UP should be investing in their employees by offering paid sick leave, reasonable schedules and a better quality of life for railroaders,” said Ed Hall, new president of the Brotherhood of Locomotive Engineers, the engineers union. “This is the only way the railroad will be able to solve their recruitment and retention problems and keep the trains running.”
Hall was working as an active engineer at the company as recently as December before taking over the union’s top job.
The new labor contracts gave its employees an immediate 14% increase in pay, including back pay. But many of the unions objected to the deals because they did not provide members the paid sick days they were seeking. Even the unions that voted to ratify the deals had a significant share of rank-and-file members who voted against them.
Not all the costs of the those contracts affected Union Pacific’s fourth-quarter results reported Tuesday. Some costs, primarily those related to back pay, were registered as an adjustment to past results. And signing bonuses for union members that were paid in January will show up when the company’s first-quarter results are reported in April.
Still, the higher labor costs did not have a big impact on the railroad’s profitability. Increased fuel costs were a much bigger hit to earnings than the increase in wages, rising $1.4 billion, or 68%, to $3.4 billion.
For the year, the company’s net income rose to a record $7 billion, up about $500 million, or 7%, from the previous record profit it posted for 2021. While overall operating expenses for 2022 rose $2.5 billion, that was outweighed by revenue rising $3 billion to a record $24.9 billion for the year.
Fourth-quarter results were slightly weaker than forecasts, as net income fell 4% from a year earlier. The railroad attributed much of that decline to higher operating expenses from a bad winter in much of its service area in December. Shares of UP were down almost 3% in mid-afternoon trading.
Two other major freight railroads, CSX (CSX) and Norfolk Southern (NSC), are due to report results Wednesday. Both are expected to report improved fourth-quarter and full-year earnings. The fourth major freight railroad, Burlington Northern Sante Fe, is a wholly owned subsidiary of Berkshire Hathaway (BRKA), which has yet to schedule its fourth-quarter earnings release.