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Union Pacific (UNP) Q1 Earnings Top & Rise Y/Y, Stock Up

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United Pacific Corporation (UNP - Free Report) reported better-than-expected earnings in first-quarter 2019 just like fellow railroads CSX Corporation (CSX - Free Report) and Kansas City Southern (KSU - Free Report) on Apr 16 and 17, respectively.

Union Pacific’s earnings of $1.93 per share surpassed the Zacks Consensus Estimate by 4 cents. The bottom line also increased 15% on a year-over-year basis primarily due to lower costs. This outperformance on the earnings front seems to have found favor with investors. As a result, the stock gained in pre-market trading.

Operating revenues came in at $5,384 million, which fell short of the Zacks Consensus Estimate of $5,475.3 million. The figure also decreased 2% year over year due to sluggish freight revenues (down 2%). The downside was due to a 2% decline in business volumes. Bulk of revenues (93.1%) at Union Pacific was derived from freight in the reported quarter.

Operating income in the first quarter increased 1% year over year to $2 billion. Operating ratio (defined as operating expenses as a percentage of revenues) improved to 63.6% from 64.6% a year-ago. Notably, lower the value of the metric the better.

Moreover, Union Pacific bought back 18.1 million shares during the quarter for $3.5 billion. Effective tax rate during the first quarter of 2019 came in at 22.3% compared with 23.4% a year ago.

Union Pacific Corporation Price, Consensus and EPS Surprise

 

Union Pacific Corporation Price, Consensus and EPS Surprise | Union Pacific Corporation Quote

Segmental Performance

Freight revenues in the Agricultural Products were $1,067 million, down 3% year over year. Revenue carloads declined 7% year over year. However, average revenue per car increased 5%.

Freight revenues in the Energy division were $982 million, down 16% year over year. Also, revenue carloads fell 15% year over year. Moreover, average revenue per car decreased 2% year over year.

Industrial freight revenues totaled $1,410 million, up 5% year over year. Revenue carloads increased 4% year over year. Also, average revenue per car was up 1%.

Freight revenues in the Premium division were $1,551 million, up 3% year over year. Revenue carloads increased 2% year over year. Average revenue per car was flat year over year.

Other revenues improved 6% to $374 million in the first quarter of 2019.

Liquidity

The company exited the quarter with cash and cash equivalents of $1,059 million compared with $1,273 million at the end of 2018. Debt (due after one year) came in at $23,409 million at the end of the quarter compared with $20,925 million at the end of 2018. Debt-to-EBITDA ratio (on an adjusted basis) increased to 2.6 from 2.3 at 2018-end.

Zacks Rank & A Key Pick

Union Pacific carries a Zacks Rank #3 (Hold). A better-ranked stock in the Zacks Transportation sector is SkyWest (SKYW - Free Report) with a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of SkyWest have gained more than 33% on a year-to-date basis.

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