Union Pacific to submit papers for mega merger by end-November; profit tops estimates

Union Pacific said it expects to submit papers for its $85 billion merger with Norfolk Southern to a regulator as soon as end-November, after the railroad operator on Thursday topped Wall Street's profit estimates on strong coal volumes.

Omaha, Nebraska-based Union Pacific had initially said it would submit the papers to the Surface Transportation Board by end-January. The review could take about 12 to 18 months.

Investors are increasingly shifting their focus to the company's deal to form the country's first coast-to-coast railroad company.

Union Pacific's shares were flat in choppy morning trading. The stock has climbed 11.4% since announcing the Norfolk deal end-July.

Railroad operators such as Union Pacific are benefiting from optimism around demand for coal transport, after U.S. President Donald Trump signed executive orders that aim to boost coal production.

Union Pacific's results include costs of $41 million, or $0.07 per share on a diluted basis, related to the mega merger, the company said.

The deal, still subject to regulatory clearance from the Surface Transportation Board, has drawn a positive response from U.S. President Donald Trump.

The railroad industry has struggled with volatile freight volumes, rising labor and fuel costs, and growing pressure from shippers over service reliability.

Revenue from transportation of coal jumped 16% for the third quarter, which drove a 7% rise in bulk segment contribution to $1.93 billion. The segment is expected to continue its momentum, a company executive said in an earnings call.

"While Union Pacific has good opportunities to grow, the rail industry is going to be challenged by technology in the trucking and shipping industries," CEO Jim Vena said in a shareholder letter.

The West Coast railroad operator posted adjusted profit of $3.08 per share, beating analysts' estimates of $2.99 per share, according to data compiled by LSEG.

Total operating revenue came in at $6.24 billion, largely in line with analysts' expectations.

Last week, rival CSX also beat estimates, albeit on improving intermodal volumes and higher pricing in its merchandise segment.