Union Pacific (UNP) Tops Earnings & Revenue Estimates In Q2

Union Pacific Corporation's (NYSE:UNP) second-quarter 2017 earnings of $1.45 beat the Zacks Consensus Estimate of $1.37 per share. The bottom line expanded 23.93% on a year-over-year basis. Results were aided by higher revenues. In fact, the earnings beat pleased the investors, leading to an increase in the stock price in pre-market trading.

Operating revenues of $5,250 million beat the Zacks Consensus Estimate of $5,162.7 million. Revenues increased 10.1% on a year-over-year basis. The bulk of revenues (93.4%) at Union Pacific were derived from freight in the reported quarter.

Freight revenues increased 11%, thereby boosting the top line. The uptick was owing to volume growth, increased fuel surcharge revenues among other factors.

Operating income in the second quarter rose 21% year over year to $2 billion. Operating ratio (defined as operating expenses as a percentage of revenues) came in at 61.8%, reflecting an improvement of 340 basis points on a year-over-year basis. The metric benefited from higher fuel prices.

During the quarter, the company bought back 7.8 million shares for $850 million. Union Pacific expects the scenario regarding business volumes to improve in the second half of the year.

Segment Details

Agricultural Products freight revenues were $907 million, up 7% year over year. Business volumes increased 3% year over year. Average revenue per car also climbed 3%.

Automotive accounted for $513 million of freight revenues, up 5% year over year. Business volumes were down 1% and average revenue per car climbed 6% year over year.

Chemicals contributed $898 million to freight revenues, up 4% year over year. Business volumes were down 2%, while average revenue per car improved 6%.

Coal revenues (freight) increased 25% year over year to $619 million. Business volumes increased 17% and average revenue per car improved 7% year over year.

Industrial Products generated freight revenues of $1,030 million, up 24% year over year on a 15% growth in business volumes. Average revenue per car was up 8%.

Intermodal segment freight revenues came in at $939 million, up 3% year over year. Business volumes were up 2%, while average revenue per car improved 1%.

Other revenues improved 1% to $344 million in the second quarter of 2017.

Liquidity

Union Pacific exited the quarter with cash and cash equivalents of $1,286 million compared with $1,277 million at the end of 2016. Debt (due after one year) came in at $15,229 million at the end of the quarter compared with $14,249 million at the end of 2016. Adjusted debt-to-capitalization ratio increased to 48.5% from 47.3% at 2016-end.

Upcoming Releases

Investors interested in the railroad space also keenly await second-quarter earnings reports from key players like Kansas City Southern (NYSE:KSU) , Canadian National Railway Company (NYSE:CNI) and Norfolk Southern Corp. (NYSE:NSC) in the coming days. While Kansas City Southern is scheduled to report on Jul 21, Canadian National and Norfolk Southern are scheduled to report on Jul 25 and Jul 26, respectively.

Zacks Rank

Union Pacific currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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