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Union Pacific (UNP) Q2 Earnings Beat Estimates, Stock Up

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Union Pacific Corporation UNP reported better-than-expected second-quarter 2021 results.

Earnings of $2.72 per share surpassed the Zacks Consensus Estimate of $2.55. Moreover, the bottom line surged 62.9% on a year-over-year basis.

Operating revenues of $5,504 million also beat the Zacks Consensus Estimate of $5,384.3 million. The top line inched up 29.7% on a year-over-year basis due to surge in freight revenues (up 29% to $5,132 million). Impressive earnings report pleased investors, owing to which the stock gained value in early trading.

Results were aided by the improving freight conditions in the United States. Business volumes, measured by total revenue carloads, increased 22% year over year driven by higher industrial, bulk and premium shipments.

Operating income in the second quarter surged 50% year over year to $2,473 million. Total operating expenses also increased 17% to $3,031 million. Operating ratio (operating expenses as a percentage of revenues) improved to 55.1% in the second-quarter 2021 compared with 61% in the year-ago quarter, despite being hurt to the tune of 210 basis points by higher fuel prices.  Notably, lower the value of the metric the better.  

Moreover, this currently Zacks Rank #3 (Hold) company’s second-quarter effective tax rate declined to 22.4% from 24.3% in the year-ago quarter. In the second quarter, Union Pacific repurchased 12.2 million shares at an aggregate cost of $2.7 billion. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Segmental Performance

Bulk (Grain & grain products, Fertilizer, Food & refrigerated, Coal & renewables) freight revenues were $1,648 million, up 19% year over year. Both revenue carloads and average revenue per car increased 13% and 5%, respectively, on a year-over-year basis.  

Industrial freight revenues totaled $1,859 million, up 24% year over year. Both revenue carloads and average revenue per car surged 15% and 8%, respectively, on a year-over-year basis.

Freight revenues in the Premium division were $1,625 million, up 50% year over year. Both revenue carloads and average revenue per car increased 31% and 14%, respectively, on a year-over-year basis.

Meanwhile, other revenues inched up 37% to $372 million in the second quarter.

Liquidity

The company exited the second quarter of 2021 with cash and cash equivalents of $1,115 million compared with $1,799 million at the end of 2020. Debt (due after a year) increased to $27,702 million at the end of the quarter from $25,660 million at 2020-end. Debt-to-EBITDA ratio (on an adjusted basis) is kept in line with December 2020-end figures at 2.9.

Sectorial Snapshot

Within the broader Transportation sector, Delta Air Lines DAL, J.B. Hunt Transport Services JBHT and Kansas City Southern KSU recently reported second-quarter 2021 results.

Delta, carrying a Zacks Rank #3, incurred a loss (excluding $2.09 from non-recurring items) of $1.07 per share. The figure was narrower than the Zacks Consensus Estimate of a loss of $1.41. Revenues of $7,126 million were substantially higher than the year-ago quarter’s levels, buoyed by recent uptick in air-travel demand. The metric also topped the Zacks Consensus Estimate of $6,340.9 million.

Kansas City Southern, carrying a Zacks Rank of 4 (Sell), reported second-quarter 2021 earnings (excluding $6.23 from non-recurring items) of $2.06 per share. The bottom line missed the Zacks Consensus Estimate of $2.16. Quarterly revenues of $749.5 million surpassed the Zacks Consensus Estimate of $733.1 million and increased 36.8% year over year, driven by 31% rise in overall carload volumes.

J.B. Hunt, a Zacks #2 (Buy) Ranked player, reported better-than-expected second-quarter 2021 results. Quarterly earnings of $1.61 per share surpassed the Zacks Consensus Estimate of $1.55. Total operating revenues of $2908.4 million outperformed the Zacks Consensus Estimate of $2722 million and increased 35.5% year over year.
 


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