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Union Pacific (UNP) Q4 Earnings Surpass Estimates, Rise Y/Y

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Union Pacific Corporation’s (UNP - Free Report) fourth-quarter 2020 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 improved 16.8% on a year-over-year basis.

Operating revenues of $5,141 million also 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 (down 1% to $4,803 million). However, the decline in freight revenues was much less than the 11% fall witnessed in third-quarter 2020. This reflects the improving freight conditions in the United States. Moreover, business volumes, measured by total revenue carloads, improved 3% year over year.

Operating income in the fourth quarter slid 4% year over year to $2,006 million. Operating expenses inched up 1% to $3,135 million. Meanwhile, operating ratio (operating expenses as a percentage of revenues) came in at 61% in the final quarter of 2020 on a GAAP basis. However, after adjusting the $278-million impairment charge, the metric improved 410 basis points on a year-over-year basis to 55.6%. Operating ratio in fourth-quarter 2020 was positively impacted to the tune of 90 basis points on lower fuel prices. Notably, lower the value of the metric the better.

Moreover, this currently Zacks Rank #3 (Hold) company’s fourth-quarter effective tax rate declined to 23% from 25.3% a year ago. In the fourth quarter, Union Pacific repurchased 3.8 million shares at an aggregate cost of $749 million.

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 $1,562 million, up 1% year over year. Moreover, average revenue per car increased 1% year over year. Meanwhile, revenue carloads were flat year over year.

Industrial freight revenues totaled $1,661 million, down 7% year over year. Also, revenue carloads fell 6% and average revenue per car slid 2% on a year-over-year basis.

Freight revenues in the Premium division were $1,580 million, up 5% year over year. Moreover, revenue carloads rose 9% year over year. Average revenue per car, however, declined 4%. 

Meanwhile, other revenues slipped 6% to $338 million in the fourth quarter.

Liquidity

The company exited the fourth quarter of 2020 with cash and cash equivalents of $1,799 million compared with $831 million at the end of 2019. Debt (due after a year) increased to $25,660 million at the end of the quarter from $23,943 million at 2019-end. Debt-to-EBITDA ratio (on an adjusted basis) deteriorated to 2.9 from 2.5 at 2019-end

Annual Results

For the full year, the company’s earnings (on an adjusted basis) came in at $8.19 per share. Revenues decreased 10.1% year over year to $19.5 billion. The Zacks Consensus Estimate for earnings was $8.06 per share while the same for revenues was $19.5 billion. Total capital investments were $2,927 million in 2020

Upcoming Railroad Releases

Investors interested in the Zacks Transportation – Rail industry will be keenly awaiting the fourth-quarter 2020 earnings reports of key players, namely Kansas City Southern (KSU - Free Report) , Norfolk Southern Corporation (NSC - Free Report) and Canadian Pacific Railway Limited (CP - Free Report) .

While Kansas City Southern will announce fourth-quarter 2020 results on Jan 22, Norfolk Southern and Canadian Pacific Railway Limited will release financial numbers on Jan 27

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