Union Pacific (UNP) to Report Q2 Earnings: A Beat in Store?
Union Pacific Corporation UNP is slated to release second-quarter 2021 results on Jul 22, before market open.
The railroad operator's earnings surpassed the Zacks Consensus Estimate in two of the last four quarters and lagged the same on the remaining occasions. The average beat is 1.2%.
The Zacks Consensus Estimate for second-quarter earnings has been revised 6% upward in the past 60 days.
Against this backdrop, let’s take a look at the factors that might have shaped the company’s June-quarter performance.
We expect the company’s results to be boosted by an uptick in overall volumes (carloads), mainly owing to the improved freight conditions in the United States as economic activities pick up the pace following the relaxation of coronavirus-related restrictions. The Zacks Consensus Estimate for second-quarter 2021 total carloads indicates an increase of 11.3% from the figure reported in the first quarter of 2021.
Owing to a better volume scenario, we expect freight revenues, which account for bulk of the railroad operator’s top line, to have improved sequentially in the second quarter of 2021. Evidently, the Zacks Consensus Estimate for second-quarter freight revenues is currently pegged at $4,675 million, implying a 10.5% increase from the figure reported in first-quarter 2021.
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. Backed by cost cuts and improved revenues, the operating ratio (operating expenses as a % of revenues) might have improved in the to-be-reported quarter. Lower the value of the operating ratio, the better. The Zacks Consensus Estimate for the operating ratio hints at an improvement to 56% from the March quarter’s reported number of 60%.
Fuel price per gallon is likely to have increased in the June quarter due to oil prices moving northward. This might have limited bottom-line growth in the June quarter. The Zacks Consensus Estimate for average fuel price per gallon is currently pegged at $2.02, indicating a rise from the March quarter’s reported number of $1.85.
What Does the Zacks Model Say?
The proven Zacks model predicts 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, which is the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.
Earnings ESP: Union Pacific has an Earnings ESP of +2.34% as the Most Accurate Estimate is 6 cents higher than the Zacks Consensus Estimate of $2.48. 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 Q1 Earnings
Union Pacific's earnings of $2 per share missed the Zacks Consensus Estimate of $2.06. The bottom line declined 7% on a year-over-year basis. Operating revenues of $5,001 million also missed the Zacks Consensus Estimate of $5,036.1 million. The top line dropped 4.4% on a year-over-year basis due to lower freight revenues
Other Stocks to Consider
Investors interested in the broader Transportation sector may also 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 +39.75% and is currently a #3 Ranked player. The company will release second-quarter 2021 results on Jul 22.
UPS has an Earnings ESP of +1.72% and a Zacks Rank of 3 at present. The company will release second-quarter 2021 results on Jul 27.
Landstar System has an Earnings ESP of +1.67% and is currently a #2 Ranked player. The company will release second-quarter 2021 results on Jul 21.
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