Union Pacific Stock Rose Due to Upbeat Q1 Earnings



Earnings beat the estimates

Union Pacific (UNP) stock was trading ~3% higher during the pre-market trading session on April 18. The company reported strong first-quarter bottom-line results. Union Pacific’s first-quarter EPS of $1.93 beat analysts’ estimate of $1.89 and also marked ~15% growth YoY (year-over-year).

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The company’s bottom-line results mainly benefited from efficient cost management, reduced fuel costs, and reduced outstanding shares, which more than offset the negative impact of lower revenues. The company registered double-digit earnings growth in all of the trailing five quarters.

Union Pacific’s first-quarter revenues were $5.4 billion—marginally lower than analysts’ estimate of $5.5 billion. The quarterly revenues fell 2% YoY due to a 2% fall in volumes. The fall more than offsets the benefit of higher fuel recoveries and pricing gains.

With efficient cost management, Union Pacific managed to improve its operating ratio. A lower rate is better for a company. The company’s operating ratio contracted by 100 basis points to 63.6%—compared to 64.6% in the first quarter of 2018.

A decline in fuel costs also boosted Union Pacific’s first-quarter earnings. The company recorded an average quarterly diesel fuel price per gallon of $2.07, which was 3% lower than the first quarter of 2018.

Peers’ performance

Various transportation stocks including Kansas City Southern (KSU), CSX (CSX), and J.B. Hunt Transport Services (JBHT) have already reported their first-quarter results. Kansas City Southern, CSX, and J.B. Hunt recorded growth of 18%, 31%, and 1.9% YoY in their respective first-quarter EPS.

Transportation stocks’ (IYT) impressive quarterly results eased investors’ concerns. Investors thought that severe winter weather and global slowdown concerns might have a negative impact on US railroad companies’ first-quarter results.

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