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Union Pacific (UNP) to Report Q3 Earnings: What's in Store?

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Union Pacific Corporation (UNP - Free Report) is slated to release third-quarter 2021 results on Oct 21, 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 1.9%.

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 third-quarter earnings has been revised 2.7% downward in the past 60 days.

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

We expect Union Pacific’s performance in the September quarter to have been hurt by Hurricane Ida. The Zacks Consensus Estimate for total carloads (measure of volumes) in the third quarter indicates a 1% dip from the number reported in the second quarter of 2021.

Due to the reduction in volumes, third-quarter freight revenues, which account for the bulk of the railroad operator’s top line, are likely to have declined sequentially. The Zacks Consensus Estimate for third-quarter freight revenues is currently pegged at $5,088 million, implying a roughly 1% decrease from the figure reported in second-quarter 2021.

As a result of weak revenues, the operating ratio (operating expenses as a % of revenues) might have deteriorated in the to-be-reported quarter. Lower the value of the operating ratio, the better. The Zacks Consensus Estimate for the September quarter’s operating ratio hints at worsening to 56% from the June quarter’s reported number of 55%.

Increase in fuel price per gallon due to the uptick in oil prices is likely to have dented the bottom line in the quarter to be reported. The Zacks Consensus Estimate for fuel price per gallon for the September quarter is currently pegged at $2.29, implying a rise from $2.16 recorded in the June quarter.

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, which is not 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 -1.39% as the Most Accurate Estimate is 4 cents lower than the Zacks Consensus Estimate of $2.53. 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 #4 (Sell), currently.

Highlights of Q2 Earnings

Union Pacific's 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.

Stocks to Consider

Investors interested in the broader Transportation  sector may consider C.H. Robinson Worldwide (CHRW - Free Report) , Knight-Swift Transportation Holdings (KNX - Free Report) and Landstar System (LSTR - Free Report) as these stocks possess the right combination of elements to beat on earnings this reporting cycle.

C.H. Robinson Worldwide has an Earnings ESP of +1.20% and is Zacks #3 Ranked, presently. The company will release third-quarter 2021 results on Oct 26.

Knight-Swift has an Earnings ESP of +1.33% and a Zacks Rank #3 at present. The company is scheduled to report third-quarter earnings numbers on Oct 20.

Landstar System has an Earnings ESP of +4.13% and is currently a #2 Ranked player. The company will release third-quarter 2021 results on Oct 20.