United Pacific (UNP) Q4 Earnings Miss Estimates, Decline Y/Y

United Pacific Corporation’s (NYSE:UNP) fourth-quarter 2019 earnings of $2.02 per share fell short of the Zacks Consensus Estimate by a penny. Moreover, the bottom line decreased 4.7% on a year-over-year basis, primarily due to decline in volumes.

Meanwhile, operating revenues of $5,212 million beat the Zacks Consensus Estimate of $5,165.1 million. However, the top line declined 9% year over year due to sluggish freight revenues (down 10%).

The year-over-year contraction in the top line was due to an 11% reduction in business volumes, measured by total revenue carloads.

Operating income in the fourth quarter declined 5% year over year to $2.1 billion. Operating expenses declined 12% to $3.11 billion. As a result, operating ratio (operating expenses as a percentage of revenues) improved to 59.7% from 61.6% a year ago, driven by this railroad operator’s efforts to control costs so as to offset weak shipments. Notably, lower the value of the metric, the better.

Moreover, this Zacks Rank #3 (Hold) company bought back 35 million shares worth $5.8 billion in 2019. Fourth-quarter effective tax rate came in at 25.3% compared with 22.9% a year ago. Total capital expenses were $3.2 billion in 2019.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Segmental Performance

Freight revenues in the Agricultural Products were $1.1 billion, down 2% year over year. Revenue carloads too slid 2% year over year. However, average revenue per car was flat year over year.

Freight revenues in the Energy division were $838 million, down 25% year over year. Also, revenue carloads fell 20% year over year. Moreover, average revenue per car decreased 6%.

Industrial freight revenues totaled $1.41 billion, flat year over year. Revenue carloads and average revenue per car were also unaltered year over year.

Freight revenues in the Premium division were $1.51 billion, down 14% year over year. Moreover, revenue carloads dropped 15% year over year. However, average revenue per car inched up 1% year over year.

Meanwhile, other revenues slipped 2% to $361 million in the fourth quarter of 2019.

Liquidity

The company exited the quarter with cash and cash equivalents of $831 million compared with $1,273 million at the end of 2018. Debt (due after a year) mounted to $23.94 billion at the end of the quarter from $20.93 billion at 2018 end. Debt-to-EBITDA ratio (on an adjusted basis) deteriorated to 2.5 from 2.3 at 2018 end.

Upcoming Releases

Investors interested in the broader Transportation sector are keenly awaiting fourth-quarter earnings reports from key players, namely United Parcel Service, Inc. (NYSE:UPS) , SkyWest, Inc. (NASDAQ:SKYW) and Old Dominion Freight Line, Inc. (NASDAQ:ODFL) . While UPS and SkyWest will report fourth-quarter earnings numbers on Jan 30, Old Dominion will release the same on Feb 6.

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