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Union Pacific's Bearish Update on Q2 Volumes, Operating Ratio
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Union Pacific Corporation (UNP - Free Report) issued a downbeat forecast for overall volumes at the Deutsche Bank Annual Global Industrials and Materials Summit, mainly due to coronavirus-related issues. Additionally, the company’s chief financial officer Jennifer Hamann stated that overall volumes for the second quarter of 2020 decreased 22% on a year-over-year basis (through Jun 2, 2020).
This unfavorable reading can be primarily attributed to double-digit declines in volumes at the Bulk (Grain & grain products, Fertilizer, Food & refrigerated, Coal & renewables: down 16%), Premium (down 29%) and Industrial divisions (down 17%).
Due to the coronavirus-induced supply-chain disruptions and closure of the U.S. automotive plants, Hamann stated that the overall volume decline at Union Pacific is estimates to be close to 20% in the June quarter. Notably, in April, management at Union Pacific had expected second-quarter carload volumes to plunge approximately 25% year over year due to freight softness as a result of the coronavirus crisis.
At the above-mentioned conference, Hamann further confirmed that despite the cost-cutting measures undertaken by Union Pacific, operating ratio (operating expenses as a % of revenues) — a key measure of profitability for stocks in the railroad industry — will not improve in the second quarter on a year-over-year basis. Notably, the metric in second-quarter 2019 was 59.6%. Per the company’s latest outlook, this key measure will remain dull due to dismal volume projection. Notably, lower the value of the operating ratio the better.
Naturally, the grim guidance for second-quarter overall volumes and the operating ratio disappointed investors. Consequently, the stock lost value in early trading.
Long-term earnings (three to five years) growth rate for Ryanair, Air Lease and Teekay Tankers is estimated at 20.5%, 3.1% and 3%, respectively.
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Union Pacific's Bearish Update on Q2 Volumes, Operating Ratio
Union Pacific Corporation (UNP - Free Report) issued a downbeat forecast for overall volumes at the Deutsche Bank Annual Global Industrials and Materials Summit, mainly due to coronavirus-related issues. Additionally, the company’s chief financial officer Jennifer Hamann stated that overall volumes for the second quarter of 2020 decreased 22% on a year-over-year basis (through Jun 2, 2020).
This unfavorable reading can be primarily attributed to double-digit declines in volumes at the Bulk (Grain & grain products, Fertilizer, Food & refrigerated, Coal & renewables: down 16%), Premium (down 29%) and Industrial divisions (down 17%).
Due to the coronavirus-induced supply-chain disruptions and closure of the U.S. automotive plants, Hamann stated that the overall volume decline at Union Pacific is estimates to be close to 20% in the June quarter. Notably, in April, management at Union Pacific had expected second-quarter carload volumes to plunge approximately 25% year over year due to freight softness as a result of the coronavirus crisis.
At the above-mentioned conference, Hamann further confirmed that despite the cost-cutting measures undertaken by Union Pacific, operating ratio (operating expenses as a % of revenues) — a key measure of profitability for stocks in the railroad industry — will not improve in the second quarter on a year-over-year basis. Notably, the metric in second-quarter 2019 was 59.6%. Per the company’s latest outlook, this key measure will remain dull due to dismal volume projection. Notably, lower the value of the operating ratio the better.
Naturally, the grim guidance for second-quarter overall volumes and the operating ratio disappointed investors. Consequently, the stock lost value in early trading.
Zacks Rank & Key Picks
Union Pacific currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the broader Zacks Transportation sector include Ryanair Holdings (RYAAY - Free Report) , Air Lease Corporation (AL - Free Report) and Teekay Tankers Ltd. (TNK - Free Report) , all three presently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Long-term earnings (three to five years) growth rate for Ryanair, Air Lease and Teekay Tankers is estimated at 20.5%, 3.1% and 3%, respectively.
Looking for Stocks with Skyrocketing Upside?
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Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
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