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UNP Rises 1.5% on Pricing Gains, Higher Volumes in Q3 2018

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Union Pacific’s third-quarter earnings results

Union Pacific (UNP) announced its third-quarter earnings results before the market opened on October 25. The company’s adjusted EPS came in at $2.15, which exceeded Reuters-surveyed analysts’ consensus estimate of $2.09 by a narrow margin of 2.6%.

The western US rail giant’s adjusted EPS rose 43.3% YoY (year-over-year) from $1.50 in the third quarter of 2017. Higher volumes, pricing gains, and lower taxes pushed UNP’s bottom line up in the quarter.

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The markets were impressed by Union Pacific’s third-quarter results, which were a record in the company’s third-quarter history. UNP stock opened at $136.50 and rose to a high of $143.68 in the first two hours of trading. However, it started moving sideways from that level and touched $142.36 during mid-trading hours.

UNP’s third-quarter revenue and key metrics

Union Pacific exceeded analysts’ revenue estimate of $5.91 billion by a thin margin of 0.21% in the third quarter. The company reported revenue of $5.92 billion, up 9.6% YoY from $5.4 billion in the third quarter of 2017. UNP’s total revenue carloads increased 6% YoY in the quarter. Its average revenue per car rose 4% YoY.

UNP posted volume gains in premium, industrial, and agricultural product traffic in the quarter. These volume gains were offset by a fall in its energy-related carloads. Its Premium segment, which mainly represents its intermodal business, and its Industrial segment posted revenue rises of 18% and 13% YoY, respectively, in the quarter.

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UNP’s operating margin remained unchanged in the third quarter. In the third quarters of both 2017 and 2018, the company’s operating margin remained at 38.3%. In the words of its CEO, Lance Fritz, “Looking ahead, I am confident that the recent progress we have made on our Unified Plan 2020 will accelerate in the near term. As we move forward with its implementation, along with other G55 + 0 initiatives, we will regain our productivity momentum and improve the value proposition for all of our stakeholders.”

Class I railroad companies’ third-quarter earnings growth

Union Pacific is the last Class I US railroad company (XTN) to report its third-quarter earnings results. UNP’s Class I peers CSX Corporation (CSX), Canadian Pacific Railway (CP), Kansas City Southern (KSU), Canadian National Railway (CNI), and Norfolk Southern (NSC) have already announced their results. Except for KSU, all these major rail companies have posted double-digit YoY earnings growth in their respective third quarters.

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