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Union Pacific (UNP) to Report Q1 Earnings: What's in Store?

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Union Pacific Corporation UNP is slated to release first-quarter 2021 results on Apr 22, before market open.

The railroad operator's earnings surpassed the Zacks Consensus Estimate in three of the last four quarters and lagged the same on the remaining occasion. The average beat is 5.8%.

Union Pacific Corporation Price and EPS Surprise

Union Pacific Corporation Price and EPS Surprise
Union Pacific Corporation Price and EPS Surprise

Union Pacific Corporation price-eps-surprise | Union Pacific Corporation Quote

The Zacks Consensus Estimate for first-quarter earnings has been revised 5.9% downward in the past 60 days.

Against this backdrop, let’s take a look at the factors that might have shaped the company’s March-quarter performance.

We expect the company’s results to be hurt by a decline in overall volumes (carloads), mainly due to the adverse weather conditions. Notably, railroads including Union Pacific curtailed operations due to the bitter cold conditions in February that resulted in affecting the U.S. freight rail network. The Zacks Consensus Estimate for first-quarter 2021 total carloads indicates a decline of 6.4% from the figure reported in the fourth quarter of 2020.

Due to tepid volumes, we expect freight revenues, which account for bulk of the railroad operator’s top line, to have declined sequentially in the first quarter of 2021. Evidently, the Zacks Consensus Estimate for first-quarter freight revenues is currently pegged at $4,675 million, indicating a 2.7% decline from the figure reported in fourth-quarter 2020.

However, the bottom line is likely to have been driven by this railroad operator’s cost-cutting measures. Increased efficiency owing to the precision scheduled railroading model is likely to have contained costs. Owing to cost cuts, the operating ratio (operating expenses as a % of revenues) might have improved in the to-be-reported quarter. Notably, lower the value of the operating ratio, the better. The Zacks Consensus Estimate for the operating ratio hints at an improvement to 59% from the December quarter’s reported number of 61%.

What Does the Zacks Model Say?

The proven Zacks model does not predict an earnings beat for Union Pacific this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. However, that is not the case here as elaborated below. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: Union Pacific has an Earnings ESP of -1.21% as the Most Accurate Estimate is 3 cents lower than the Zacks Consensus Estimate of $2.08. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Union Pacific carries a Zacks Rank #3, currently.

Highlights of Q4 Earnings

Union Pacific's earnings (excluding 31 cents from non-recurring items) of $2.36 per share beat the Zacks Consensus Estimate of $2.25. Moreover, the bottom line increased 16.8% on a year-over-year basis. Operating revenues of $5,141 million marginally beat the Zacks Consensus Estimate. However, the top line dipped 1% on a year-over-year basis due to the reduction in freight revenues.

Stocks to Consider

Investors interested in the broader Transportation sector may consider Alaska Air Group ALK, United Parcel Service UPS and Landstar System LSTR as these stocks possess the right combination of elements to beat estimates this reporting cycle.

Alaska Air has an Earnings ESP of +1.01% and is Zacks #3 Ranked, presently. The company will release first-quarter 2021 results on Apr 22.

UPS has an Earnings ESP of +1.83% and a Zacks Rank of 3 at present. The company will release first-quarter 2021 results on Apr 27.

Landstar System has an Earnings ESP of +0.35% and is currently a #2 Ranked player. The company will release first-quarter 2021 results on Apr 21

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