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Union Pacific (UNP) Q2 Earnings Meet Estimates, Down Y/Y
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There seems to be no respite for the Omaha, NE-based railroad operator Union Pacific Corporation (UNP - Free Report) as declining coal shipments continue to hamper its results. As has been the case in the previous few quarters, coal played spoilsport for this key railroad player in the second quarter of 2016 as well. Due to the lackluster results, shares declined in early trading.
Although the company’s earnings per share (on an adjusted basis) of $1.17 were in line with the Zacks Consensus Estimate, this was mainly due to the latter being pretty conservative after a number of downward revisions in earnings estimates over the past few months. On a year-over-year basis, earnings declined 15%.
Operating Results
Revenues decreased 12% year over year to $4.8 billion in the second quarter, almost in line with the Zacks Consensus Estimate. The bulk of revenues at Union Pacific is derived from freight. A 13% decline in freight revenues hurt the top line.
Declining coal shipments weighed on the railroad operator’s results yet again. Volumes slipped 11%, with coal playing the biggest culprit. Apart from coal, decreasing volumes of industrial products, agricultural products, automotive, chemicals and intermodal also led to the decline.
Operating income in the second quarter witnessed a decline of 15% year over year to $1.7 billion. Operating ratio (defined as operating expenses as a percentage of revenues) deteriorated 110 basis points year over year to 65.2%. During the quarter, the company bought back 7 million shares for $602 million.
Segment Details
Agricultural Products freight revenues were $845 million, down 3% year over year. Business volumes increased 2% year over year while average revenue per car declined 4%.
Automotive accounted for $488 million of freight revenues, down 13% year over year. Business volumes were down 2% and average revenue per car fell 11% year over year.
Chemicals contributed $864 million to freight revenues, down 5% year over year. Volumes were down 3% while average revenue per car dropped 2%.
Coal revenues (freight) decreased 27% year over year to $494 million. Volumes declined 21% and average revenue per car fell 8% year over year.
Industrial Products generated freight revenues of $830 million, down 14% year over year on an 11% volume decline. Average revenue per car was down 4%.
Intermodal segment freight revenues went down 16% year over year to $909 million and volumes declined 14% year over year. Also, average revenue per car fell 3%.
Other revenues declined 6% to $340 million in the second quarter of 2016.
Union Pacific exited the second quarter of 2016 with cash and cash equivalents of $1,830 million, compared with $1,391 million at the end of 2015. Long-term debt stood at $14.77 billion at the end of the reported quarter compared with $13.61 billion at the end of 2015. Adjusted debt-to-capitalization ratio increased to 47.1% from 45.7% at 2015-end.
Zacks Rank
Currently, Union Pacific has a Zacks Rank #3 (Hold). Better-ranked transportation stocks include United Parcel Services, Inc. (UPS - Free Report) , Euroseas Ltd. (ESEA - Free Report) and Frontline Ltd. (FRO - Free Report) . All the companies carry a Zacks Rank #2 (Buy).
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Union Pacific (UNP) Q2 Earnings Meet Estimates, Down Y/Y
There seems to be no respite for the Omaha, NE-based railroad operator Union Pacific Corporation (UNP - Free Report) as declining coal shipments continue to hamper its results. As has been the case in the previous few quarters, coal played spoilsport for this key railroad player in the second quarter of 2016 as well. Due to the lackluster results, shares declined in early trading.
Although the company’s earnings per share (on an adjusted basis) of $1.17 were in line with the Zacks Consensus Estimate, this was mainly due to the latter being pretty conservative after a number of downward revisions in earnings estimates over the past few months. On a year-over-year basis, earnings declined 15%.
Operating Results
Revenues decreased 12% year over year to $4.8 billion in the second quarter, almost in line with the Zacks Consensus Estimate. The bulk of revenues at Union Pacific is derived from freight. A 13% decline in freight revenues hurt the top line.
Declining coal shipments weighed on the railroad operator’s results yet again. Volumes slipped 11%, with coal playing the biggest culprit. Apart from coal, decreasing volumes of industrial products, agricultural products, automotive, chemicals and intermodal also led to the decline.
Operating income in the second quarter witnessed a decline of 15% year over year to $1.7 billion. Operating ratio (defined as operating expenses as a percentage of revenues) deteriorated 110 basis points year over year to 65.2%. During the quarter, the company bought back 7 million shares for $602 million.
Segment Details
Agricultural Products freight revenues were $845 million, down 3% year over year. Business volumes increased 2% year over year while average revenue per car declined 4%.
Automotive accounted for $488 million of freight revenues, down 13% year over year. Business volumes were down 2% and average revenue per car fell 11% year over year.
Chemicals contributed $864 million to freight revenues, down 5% year over year. Volumes were down 3% while average revenue per car dropped 2%.
Coal revenues (freight) decreased 27% year over year to $494 million. Volumes declined 21% and average revenue per car fell 8% year over year.
Industrial Products generated freight revenues of $830 million, down 14% year over year on an 11% volume decline. Average revenue per car was down 4%.
Intermodal segment freight revenues went down 16% year over year to $909 million and volumes declined 14% year over year. Also, average revenue per car fell 3%.
Other revenues declined 6% to $340 million in the second quarter of 2016.
UNION PAC CORP Price, Consensus and EPS Surprise
UNION PAC CORP Price, Consensus and EPS Surprise | UNION PAC CORP Quote
Liquidity
Union Pacific exited the second quarter of 2016 with cash and cash equivalents of $1,830 million, compared with $1,391 million at the end of 2015. Long-term debt stood at $14.77 billion at the end of the reported quarter compared with $13.61 billion at the end of 2015. Adjusted debt-to-capitalization ratio increased to 47.1% from 45.7% at 2015-end.
Zacks Rank
Currently, Union Pacific has a Zacks Rank #3 (Hold). Better-ranked transportation stocks include United Parcel Services, Inc. (UPS - Free Report) , Euroseas Ltd. (ESEA - Free Report) and Frontline Ltd. (FRO - Free Report) . All the companies carry a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>