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Why Is Union Pacific (UNP) Up 10.2% Since Its Last Earnings Report?

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It has been about a month since the last earnings report for Union Pacific Corporation (UNP - Free Report) . Shares have added about 10.2 % in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is UNP due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

First Quarter Earnings

The company’s earnings earnings of $1.68 beat the Zacks Consensus Estimate of $1.65 per share. The bottom line expanded 27.3% on a year-over-year basis. Results were aided by higher revenues.

Operating revenues of $5,475 million also surpassed the Zacks Consensus Estimate of $5,370.8 million. Moreover, revenues increased 6.7% year over year. Higher freight revenues boosted the top line. The bulk of revenues (93.6%) at Union Pacific was derived from freight in the reported quarter.

Freight revenues grew 7%, boosting the top line. The uptick was owing to volume growth and increased fuel surcharge revenues among other factors.

Operating income in the first quarter rose 8% year over year to $1,939 million. Adjusted operating ratio (defined as operating expenses as a percentage of revenues) came in at 64.6%, reflecting an increase of 0.6 points.

Segment Details

Agricultural Products freight revenues were $1,098 million, flat year over year. Revenue carloads decreased 4%year over year. Average revenue per car however increased 5%.

Freight revenues at the Energy division were $1,173 million, up 15% year over year. Revenue carloads increased 6%year over year. Average revenue per car increased 8%.

Industrial freight revenues were $1,340 million, up 6% year over year. Revenue carloads increased 2%year over year. Average revenue per car increased 4%.

Freight revenues at the Premium division were $1,511 million, up 7% year over year. Revenue carloads increased 2%year over year. Average revenue per car increased 5%.

Other revenues improved 4% to $353 million in the first quarter of 2018.

Liquidity

Union Pacific exited the quarter with cash and cash equivalents of $1,048 million compared with $1,275 million at the end of 2017. Debt (due after one year) came in at $15,697 million at the end of the quarter compared with $16,144 million at the end of 2017. Adjusted debt-to-capitalization ratio increased to 45.1% from 43.9% at 2017-end.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been five revisions higher for the current quarter compared to two lower.

VGM Scores

At this time, UNP has a subpar Growth Score of D. Its Momentum is doing a bit better with a C. The stock was also allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks' style scores indicate that the company's stock is suitable for value and momentum investors.

Outlook

Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising. Interestingly, UNP has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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