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Union Pacific (UNP) Beats Earnings & Revenue Estimates in Q4

Zacks Equity Research

Union Pacific Corporation UNP delivered impressive fourth-quarter 2018 results, with earnings and revenues beating the Zacks Consensus Estimate.

The transportation company’s earnings of $2.12 per share surpassed the Zacks Consensus Estimate by 6 cents. The bottom line also surged 39% on a year-over-year basis. Results were aided by higher revenues and a lower tax rate.

Operating revenues came in at $5,757 million, which outpaced the Zacks Consensus Estimate of $5,719.3 million. The figure also increased 6% year over year. Higher freight revenues (up 6%) boosted the top-line performance. The uptick was driven by volume growth of 3% and increased fuel surcharge revenues among other factors. Bulk of revenues (93.6%) at Union Pacific was derived from freight in the reported quarter.

Operating income in the fourth quarter declined 2% year over year to $2,210 million. Operating ratio (defined as operating expenses as a percentage of revenues) improved 1.1 points compared with the adjusted year-ago figure to 61.6% during the reported quarter. Moreover, Union Pacific bought back 8 million shares at an aggregate value of $1.2 billion. Effective tax rate during the fourth quarter of 2018 came in at 22.9%.

The impressive quarterly performance raised investors’ optimism. Consequently, the stock gained in pre-market trading.

Segmental Performance

Freight revenues in the Agricultural Products were $1,124 million, up 5% year over year. Revenue carloads declined 2% year over year. Moreover, average revenue per car increased 7%.

Freight revenues in the Energy division were $1,110 million, down 8% year over year. Also, revenue carloads fell 9% year over year. Moreover, average revenue per car was flat year over year.

Industrial freight revenues totaled $1,405 million, up 10% year over year. Revenue carloads increased 6% year over year. Also, average revenue per car was up 3%.

Freight revenues in the Premium division were $1,748 million, up 15% year over year. Revenue carloads increased 9% year over year. Average revenue per car also increased 6%.

Other revenues improved 2% to $370 million in the fourth quarter of 2018.

Union Pacific Corporation Price, Consensus and EPS Surprise

Union Pacific Corporation Price, Consensus and EPS Surprise | Union Pacific Corporation Quote


This Zacks Rank #3 (Hold) company exited 2018 with cash and cash equivalents of $1,273 million compared with $1,275 million at the end of 2017. Debt (due after one year) came in at $20,925 million at the end of the quarter compared with $16,144 million at the end of 2017. Debt-to-EBITDA ratio (on an adjusted basis) increased to 2.3 from 1.9 at 2017 end. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

2019 Outlook

Union Pacific expects revenue and volume growth in 2019 on the back of continued economic growth and improving service performance. Also, the company is highly optimistic about improving operating margins due to benefits arising from the company’s G55 + 0 initiatives, including Unified Plan 2020 as well as favorable pricing.

Upcoming Releases

Investors interested in the Zacks Transportation Sector are keenly awaiting fourth-quarter 2018 earnings reports from key players like ArcBest Corporation ARCB, Allegiant Travel Company ALGT and SkyWest, Inc. SKYW. While ArcBest and Allegiant are scheduled to report fourth-quarter earnings on Jan 30, SkyWest will release the same on Jan 31.

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