Union Pacific’s 3Q16 earnings
On October 20, 2016, dominant Western US railroad Union Pacific (UNP) released its 3Q16 earnings, reporting adjusted EPS (earnings per share) of $1.36 and missing the Wall Street analyst estimate of ~$1.40.
UNP disappointed market participants and witnessed a 6.7% fall on the same day. Its 3Q16 EPS fell 9% from the $1.50 it saw in 3Q15.
How did peers’ stock react?
UNP is the largest railroad in the US in terms of revenue, and so the results of this behemoth’s latest fiscal quarter are indicative of US economic activities. The big question now is this: Is the US ready for a hike in interest rates?
Of course, we’ll have to leave that to economists to debate. But given UNP’s results, here’s how major railroads’ stock prices changed on October 20, 2016:
CSX Corporation (CSX): -2.4%Norfolk Southern (NSC): -2.6%Kansas City Southern (KSU): -1.6%Canadian Pacific (CP): -2.9%Canadian National Railway (CNI): -1.7%Genesee & Wyoming (GWR): 0.5%
Investors interested in the transportation and logistics space can consider the ETFs like the iShares Transportation Average ETF (IYT). Major US railroads and airlines make up 23.6% and 46.8%, respectively, of the portfolio holdings of IYT.
Management’s thoughts after 3Q16
Although Union Pacific missed on earnings, it did meet analysts’ revenue expectations, reaching $5.2 billion in overall revenues, slightly ahead of the estimates.
Commenting on the 3Q16 results, Lance Fritz, UP’s Chairman, President, and Chief Executive Officer stated: “The macroeconomic environment still has its challenges—an unstable global economy, the relatively strong US dollar, and continued soft demand for consumer goods. However, certain segments of the economy, such as grain and energy, are showing signs of life.”
In this series, we’ll go through the performance of various segments of UNP along with the management’s outlook. We’ll also see whether analysts have changed their views on the company after its 3Q16 results.