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Category: Stock Market and Union Pacific
Date: 21 October 2019 Stock Price: $166 We take a look at transport company, Union Pacific's financial results for the 3rd quarter of their 2019 financial year. Has the group continued to benefit from a strong US economy? And do we value the stock of Union Pacific at more or less than what we did for the 2nd quarter 2019 earnings report?
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About Union Pacific
Union Pacific Corporation (NYSE:UNP) is one of America's leading transportation companies. Its principal operating company, Union Pacific Railroad, is North America's premier railroad franchise, covering 23 states across the western two-thirds of the United States. The railroad's diversified business mix is classified into its Agricultural Products, Energy, Industrial and Premium business groups. Union Pacific serves many of the fastest-growing U.S. population centers, operates from all major West Coast and Gulf Coast ports to eastern gateways, connects with Canada's rail systems and is the only railroad serving all six major Mexico gateways. Union Pacific provides value to its roughly 10,000 customers by delivering products in a safe, reliable, fuel efficient and environmentally responsible manner
VISION:
Building America.
Our vision symbolizes the Union Pacific experience for all the people whose lives we touch. It connects the importance of UP’s rail transportation to America's economy, honors the generations that preceded us and is the promise for the generations that will follow us.
MISSION:
The Men and Women of Union Pacific Are Dedicated to Serve.
Union Pacific works for the good of our customers, shareholders, communities and one another. Our commitment defines us and drives the economic strength of our company and our country.
VALUES:
Passion for Performance.
Our passion, concentration and determination will drive our safety, customer satisfaction and quality results.
High Ethical Standards.
Our reputation will always be a source of pride for our employees and a bond with our customers, shareholders and communities.
Work as a Team.
We are all part of the same team, and working together to reach our common goals is one of our strengths. Communication and respect are the foundation of great teamwork.
Union Pacific Railroad Fast Facts(For Full Year 2018)
VISION:
Building America.
Our vision symbolizes the Union Pacific experience for all the people whose lives we touch. It connects the importance of UP’s rail transportation to America's economy, honors the generations that preceded us and is the promise for the generations that will follow us.
MISSION:
The Men and Women of Union Pacific Are Dedicated to Serve.
Union Pacific works for the good of our customers, shareholders, communities and one another. Our commitment defines us and drives the economic strength of our company and our country.
VALUES:
Passion for Performance.
Our passion, concentration and determination will drive our safety, customer satisfaction and quality results.
High Ethical Standards.
Our reputation will always be a source of pride for our employees and a bond with our customers, shareholders and communities.
Work as a Team.
We are all part of the same team, and working together to reach our common goals is one of our strengths. Communication and respect are the foundation of great teamwork.
Union Pacific Railroad Fast Facts(For Full Year 2018)
- Route Miles: 32,200
- Employees: 42,000
- Annual Payroll: $4.3 billion
- Capital Spending :$3.2 billion
- Capital Spending 2009-2018: $34 billion
- Locomotives: 8,300
- Customers: 10,000
Financial overview of Union Pacific's 3rd quarter 2019 earnings report
The numbers below refers to the latest quarter's data unless specified otherwise
Revenue Ton-miles (in millions)
- Total operating revenues: $5.516 billion (down 7% from $5.928 billion for the same quarter of the previous year)
- Total operating expenses: $3.282 billion (down 10% from $3.659 billion for the same quarter of the previous year)
- Net Income: $ 1.555 billion (down 2% from $ 1.593 billion for the same quarter of the previous year)
- Diluted earnings per share: $ 2.22 (up 3% from $2.15 for the same quarter of the previous year)
- Weighted average number of shares - diluted: 701.9 million (down from 740.9 million for the same quarter of the previous year)
- Dividends declared per share :$ 0.97 (up 21% from $ 0.80 for the same quarter of the previous year)
- Cash and cash equivalents: $ 1.250 billion
- Cash and cash equivalents per share: $1.78
- Cash and cash equivalents makes up 1.07% of the group's market capital
- Cash and cash equivalents makes up 2.01% of Union Pacific's total assets
- Stockholders' equity in Union Pacific : $18.016 billion
- Stockholders equity per share: $25.66
- So Union Pacific is trading at 6.48 times its stockholders equity per share, which is well outside the expected range of between 2 and 4 times that most firms tend to trade at.
Revenue Ton-miles (in millions)
- Agricultural Products: 24.001
- Energy: 36.053
- Industrial: 25.080
- Premium: 22.973
- Total: 108.107
Union Pacific (UNP) management commentary on the results and earnings guidance
Omaha, Neb., October 17, 2019 – Union Pacific Corporation (NYSE: UNP) today reported 2019 third quarter net income of $1.6 billion, or $2.22 per diluted share. This compares to $1.6 billion, or $2.15 per diluted share, in the third quarter 2018. “Given the challenging volume environment we delivered solid third quarter financial results, including an all-time best quarterly operating ratio of 59.5 percent,” said Lance Fritz, Union Pacific chairman, president and chief executive officer. “The work our employees are doing as part of Unified Plan 2020 is foundational to the company’s success and I am confident there are additional improvement opportunities going forward for our customers and shareholders.”
In addition:
Summary of Third Quarter Freight Revenues
2019 Outlook
“We look forward to building on our Unified Plan 2020 successes as we provide a highly consistent and reliable service product for our customers,” Fritz said. “We remain squarely focused on driving long-term shareholder value by appropriately investing in the railroad and returning excess cash to our shareholders.
In addition:
- Diluted earnings per share of $2.22 increased 3 percent.
- Operating ratio of 59.5 percent improved 2.2 points.
- Operating income of $2.2 billion was down 2 percent.
Summary of Third Quarter Freight Revenues
- Agricultural Products down 1 percent
- Industrial down 1 percent
- Premium down 9 percent
- Energy down 20 percent
2019 Outlook
“We look forward to building on our Unified Plan 2020 successes as we provide a highly consistent and reliable service product for our customers,” Fritz said. “We remain squarely focused on driving long-term shareholder value by appropriately investing in the railroad and returning excess cash to our shareholders.
Union Pacific (NYSE:UNP) stock price history
The image below obtained from Google shows the stock price history of Union Pacific (NYSE: UNP) for the last 5 years. 5 years ago the stock of Union Pacific was trading at around $114.60 and its currently trading at $166.00 a stock. That's a return of 44.8% provided to Union Pacific stockholders over the last 5 years.
The stock of Union Pacific is trading at a lot closer to its 52 week high of $180.54 than it is to its 52 week low of $128.08, which to us is a clear indication that the short term sentiment and momentum of Union Pacific's stock is positive.
The stock of Union Pacific is trading at a lot closer to its 52 week high of $180.54 than it is to its 52 week low of $128.08, which to us is a clear indication that the short term sentiment and momentum of Union Pacific's stock is positive.
Recent coverage of Union Pacific
The extract regarding Union Pacific was obtained from TheStreet.com
Consider Union Pacific (UNP - Get Report) , the railroad which saw revenues fall 7% this past quarter. Inventors originally sent shares lower on the news, but after listening to the company's conference call, they soon realized that Union Pacific cut costs and reduced their headcount, making the shortfall not as bad as fears. A similar story played out at rival CSX (CSX - Get Report) yesterday, as the company cut costs in anticipation of the weakness.
Read the full article here
Consider Union Pacific (UNP - Get Report) , the railroad which saw revenues fall 7% this past quarter. Inventors originally sent shares lower on the news, but after listening to the company's conference call, they soon realized that Union Pacific cut costs and reduced their headcount, making the shortfall not as bad as fears. A similar story played out at rival CSX (CSX - Get Report) yesterday, as the company cut costs in anticipation of the weakness.
Read the full article here
Union Pacific (NYSE:UNP) stock valuation
Based on Union Pacific's latest earnings report and their outlook our valuation model provides a target (full value) price at $162.4 per Union Pacific stock (down from our 2nd quarter 2019 earnings report valuation of Union Pacific). We therefore believe the stock of Union Pacific is close to fully valued.
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target (full value) price which in this case is $162.40. We therefore believe a good entry point into Union Pacific is at $146.20 or below. Since the stock of Union Pacific is close to being fully valued we expect the stock to trade mostly sideways in coming weeks and months until there is a new catalyst to drive the group's stock price in particular direction.
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target (full value) price which in this case is $162.40. We therefore believe a good entry point into Union Pacific is at $146.20 or below. Since the stock of Union Pacific is close to being fully valued we expect the stock to trade mostly sideways in coming weeks and months until there is a new catalyst to drive the group's stock price in particular direction.