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What to Expect from Union Pacific’s First-Quarter Earnings

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First-quarter estimates

Union Pacific (UNP) plans to report its first-quarter results on April 18. The railroad company has surpassed analysts’ consensus estimates in all of the preceding four quarters with an average positive surprise of ~2%.

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Wall Street estimates suggest that Union Pacific could once again report double-digit earnings growth in the first quarter. However, they caution that the growth rate could be drastically lower than the growth rates it had registered in the preceding four quarters.

Union Pacific registered over 25% YoY earnings growth in all of the last four quarters. But, for first-quarter 2019, analysts project adjusted EPS of $1.90 for Union Pacific, which implies a rise of 13.3% YoY.

Factors to consider

Wall Street expects lower revenue growth to hurt Union Pacific’s earnings growth. Analysts project the company’s revenues to increase by 1.3% YoY to $5.5 billion. The US railroad company (IYT) registered high-single-digit revenue growth in the last four quarters.

Sluggish revenue growth is mainly due to a decline in rail traffic volumes during the quarter. On April 3, Union Pacific reported a 1.4% YoY decline in its rail traffic volume for the first quarter. Carload traffic witnessed a 5.3% decline, while intermodal volumes grew 3.7% in the quarter.

However, analysts believe higher pricing and lower oil prices will support Union Pacific’s first-quarter earnings growth. After touching the peak of $76.40 on October 3, WTI crude oil prices fell sharply and have traded between $50 and $60 during the first quarter.

Major railroad companies (IYT) CSX (CSX), Norfolk Southern (NSC), and Kansas City Southern (KSU) are expected to see EPS rises of 17%, 13.2%, and 11.1%, respectively, YoY.

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