Union Pacific Beats 4Q, Revs Up Y/Y - Analyst Blog


Union Pacific Corporation   ( UNP ) reported fourth quarter fiscal 2012 adjusted earnings of $2.19 per share, surpassing the Zacks Consensus Estimate of $2.16 as well as the year-ago earnings of $1.99. Better-than-expected earnings came on the back of higher core pricing and efficient network operations despite weaker volumes. For the year 2012, the company reported adjusted earnings of $8.27, up 23.1% year over year.

Revenues rose 3% year over year to $5,250 million in the fourth quarter, but missed the Zacks Consensus Estimate of $5,343 million. Volumes (carloads) registered a dip of 2% year over year due to lower coal and agricultural shipments. Average revenue per car increased 5% year over year.

For full-year 2012, revenues rose 7% year over year to $20,926 million. While volumes dipped marginally by 0.3%, average revenue per car rose 7% on a year-over-year basis.

Operating income leaped 7% year over year to $1,725 million in the fourth quarter. For the full year, operating income was $ 6,745 million, up 18% year over year.

Operating expenses for the quarter inched up 1% year over year to $3,525 million. Higher depreciation expenses (up 10%) and purchased services and materials expenses (up 5%) were primarily responsible for the increase. Operating expenses for the year rose 3% year over year to $14,181 million.

Operating ratio (defined as operating expenses as a percentage of revenue) improved 120 bps year over year to 67.1% in the reported quarter. For 2012, operating ratio saw an improvement of 290 basis points year over year to 67.8%. Further, the company's customer satisfaction index reached to 93 from 92 in the year ago period.

Segment Details

Agricultural revenues in the fourth quarter were $785 million, down 8% year over year. Business volumes were down 9% year over year and average revenue per car was flat year over year.

Automotive accounted for $466 million revenues, up 14% year over year. Business volumes were up 9% year over year and average revenue per car rose 5% year over year.

Chemical contributed $834 million in revenues, up 15% year over year. Volume was up 14% year over year. Average revenue per car came in flat year over year.

Coal revenues saw a decline of 7% year over year to $990 million, owing to 17% decline in volumes. However, average revenue per car remained positive with 12% growth year over year.

Industrial Products generated revenues of $835 million, up 3% despite flat volumes on a year-over-year basis. Average revenue per car was up 3% year over year.

Intermodal segment revenues were $1,021 million, up 6% year over year. Business volumes were up 2% year over year. Average revenue per car was up 5% year over year.

Other revenues increased 14.3% year over year to $319 million.


Union Pacific exited 2012 with cash and cash equivalents of $1,063 million, down from $1,217 million a year ago. Free cash flows were $1,382 million at the end of the year compared with $1,917 million in 2011.  

Long-term debt was $8.8 billion in 2012 versus $8.7 billion in 2011. Adjusted debt-to-capitalization ratio decreased to 39.1% from 40.7% at year-end 2011. Return on invested capital stood at 14.0% in 2012 compared with 12.4% in 2011.  

Other Railroad Stocks

Other railroads that have already released their fourth quarter earnings include Norfolk Southern Corp. ( NSC ) and Kansas City Southern ( KSU ). Both the companies surpassed their Zacks Consensus Estimates. While Norfolk Southern registered a year-over-year decline in its earnings, Kansas registered a substantial growth over the prior-year quarter.

Another stock worth considering within the sector is Genesee & Wyoming Inc. ( GWR ), which holds a Zacks Rank #1 (Strong Buy).

Our Analysis

Union Pacific continues to deliver strong results across most of its business groups including automotive, chemicals and Intermodal. However, the near-term growth for Union Pacific is expected to be tempered by lower coal and agriculture volumes that will likely weigh on top-line growth going forward. Further, stiff competition, unionized workforce and increased railroad regulation might limit the potential upside for the stock.

Union Pacific currently has a Zacks Rank #4 (Sell).

GENESEE & WYO (GWR): Free Stock Analysis Report

KANSAS CITY SOU (KSU): Free Stock Analysis Report

NORFOLK SOUTHRN (NSC): Free Stock Analysis Report

UNION PAC CORP (UNP): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: GWR , KSU , NSC , UNP



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