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Category: Stock Market and Union Pacific (UNP)
Date: 24 July 2020 Stock Price of Union Pacific: $175 We take a look at transport company, Union Pacific's earnings report for the 2nd quarter of their 2020 fiscal year. Revenues declined by -24% for the quarter compared to the same quarter of the previous year as volumes declined by 20% due to the impact of Covid-19.
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The Second Quarter proved very challenging as we faced a volume decline of 20 percent due to the economic impact of the COVID-19 pandemic. Demonstrating the transformation our Company is experiencing through the implementation of Unified Plan 2020, we were able to largely mitigate the impact of that volume loss-Lance Fritz, Union Pacific chairman, president and chief executive office "
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
Overview of Union Pacific's 2nd quarter 2020 earnings report
The numbers below refers to the latest quarter's data unless specified otherwise
Freight Revenues (in millions)
- Total operating revenues: $4.244 billion (down from $5.596 billion for the same quarter of the previous year)
- Total operating revenues are down by -24% over the last 12 months
- Total operating expenses: $2.590 billion (down from $3.336 billion for the same quarter of the previous year)
- Total operating expenses decreased by -22.3% over the last 12 months
- Some margin squeeze for Union Pacific with their revenues decreasing at a slower rate than their operating expenses
- Net Income: $ 1.132 billion (down from $ 1.570 billion for the same quarter of the previous year)
- Diluted earnings per share: $1.67 (down from $2.22 for the same quarter of the previous year)
- PE ratio of Union Pacific: 25.4
- Weighted average number of shares - diluted: 679.2 million (down from 708 million for the same quarter of the previous year)
- Dividends declared per share: $0.97 (up 10% from $ 0.88 for the same quarter of the previous year)
- Dividend yield of Union Pacific: 2.2%
- Cash and cash equivalents: $2.706 billion
- Cash and cash equivalents per share: $3.98
- Cash and cash equivalents makes up 2.3% of Union Pacific's market capital
- Cash and cash equivalents makes up 4.3% of Union Pacific's total assets
- Stockholders' equity in Union Pacific : $16.452 billion
- Stockholders equity per share: $24.22
- So Union Pacific is trading at 7.23 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.
- Firms in the S&P 500 trades at an average price to book value of 3.7 times
Freight Revenues (in millions)
- Bulk: 1 534
- Industrial: 1 894
- Premium: 1 452
- Total: 4 880
Union Pacific (UNP) management commentary on their 1st quarter 2020 earnings
Union Pacific Corporation (NYSE: UNP) today reported 2020 second quarter net income of $1.1 billion, or $1.67 per diluted share. This compares to $1.6 billion, or $2.22 per diluted share, in the second quarter 2019.
"The Second Quarter proved very challenging as we faced a volume decline of 20 percent due to the economic impact of the COVID-19 pandemic. Demonstrating the transformation our Company is experiencing through the implementation of Unified Plan 2020, we were able to largely mitigate the impact of that volume loss," said Lance Fritz, Union Pacific chairman, president and chief executive officer. "Our dedicated employees are feeling a very real impact from this pandemic, making tangible sacrifices. Despite this adversity, they continue to make strides to improve the safety of our railroad, while providing our customers an uninterrupted, enhanced service product."
"The Second Quarter proved very challenging as we faced a volume decline of 20 percent due to the economic impact of the COVID-19 pandemic. Demonstrating the transformation our Company is experiencing through the implementation of Unified Plan 2020, we were able to largely mitigate the impact of that volume loss," said Lance Fritz, Union Pacific chairman, president and chief executive officer. "Our dedicated employees are feeling a very real impact from this pandemic, making tangible sacrifices. Despite this adversity, they continue to make strides to improve the safety of our railroad, while providing our customers an uninterrupted, enhanced service product."
Second Quarter SummaryOperating revenue of $4.2 billion was down 24 percent in second quarter 2020, compared to second quarter 2019. Second quarter business volumes, as measured by total revenue carloads, decreased 20 percent compared to 2019. Volumes for all three business teams – bulk, industrial, and premium – declined in the quarter due to the deteriorating economic conditions brought on by the COVID-19 pandemic. In addition:
Summary of Second Quarter Freight Revenues
2020 OutlookAlthough the state of global economy is somewhat uncertain given the lingering impact of the COVID-19 pandemic, Union Pacific currently expects full year 2020 carload volumes to be down around 10 percent or so compared to 2019.
"Our first priority continues to be the health and safety of our employees during the pandemic, as they perform critical service to support economic recovery," Fritz said. "Our ability to be nimble and flexible in adjusting our resources to rapidly changing volumes, while providing a high level service product, demonstrates the strength of our service model. We remain focused on providing our customers with a safe, reliable and efficient service product."
- Quarterly freight revenue declined 24 percent, compared to second quarter 2019, as core pricing gains were offset by lower volumes, negative business mix and decreased fuel surcharge revenue.
- Union Pacific's 61 percent operating ratio increased 1.4 points compared to second quarter 2019.
- Union Pacific recognized a $69 million gain from a real estate sale to the Illinois State Toll Highway Authority.
- The $1.26 per gallon average quarterly diesel fuel price in second quarter 2020 was 43 percent lower than second quarter 2019.
- Union Pacific's first half reportable personal injury rate of 0.83 incidents per 200,000 employee hours improved 5 percent compared to first half 2019.
- Quarterly freight car velocity was 225 daily miles per car, an 11 percent improvement compared to second quarter 2019.
- Quarterly locomotive productivity was 136 GTMs per horsepower day, a 12 percent improvement compared to second quarter 2019.
- Average maximum train length was 8,664 feet, a 13 percent increase compared to second quarter 2019.
Summary of Second Quarter Freight Revenues
- Bulk down 17 percent
- Industrial down 23 percent
- Premium down 33 percent
2020 OutlookAlthough the state of global economy is somewhat uncertain given the lingering impact of the COVID-19 pandemic, Union Pacific currently expects full year 2020 carload volumes to be down around 10 percent or so compared to 2019.
"Our first priority continues to be the health and safety of our employees during the pandemic, as they perform critical service to support economic recovery," Fritz said. "Our ability to be nimble and flexible in adjusting our resources to rapidly changing volumes, while providing a high level service product, demonstrates the strength of our service model. We remain focused on providing our customers with a safe, reliable and efficient service product."
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 $107.50 and its currently trading at $157.27 a stock. That's a very decent return of 58.4% 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 $188.96 than it is to its 52 week low of $105.08 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 $188.96 than it is to its 52 week low of $105.08 which to us is a clear indication that the short term sentiment and momentum of Union Pacific's stock is positive.
Union Pacific (UNP) stock vs Norfolk Southern (NSC) stock price over the last 3 years
The image below shows the stock price performance of Union Pacific (UNP) and Norfolk Southern (NSC) over the last 3 years. Both are freight rail operators active in the USA. And as the image shows the stock price performance of the two freight rail operators are very similar. The summary below shows the stock price returns provided by each stock over the last 3 years:
- Union Pacific (UNP): 69.80%
- Norfolk Southern (NSC): 59.53%
Recent coverage of Union Pacific (UNP)
The extract below regarding Union Pacific's latest earnings was obtained from Finance.yahoocom
Union Pacific (UNP) came out with quarterly earnings of $1.67 per share, beating the Zacks Consensus Estimate of $1.61 per share. This compares to earnings of $2.22 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of 3.73%. A quarter ago, it was expected that this railroad would post earnings of $1.86 per share when it actually produced earnings of $2.15, delivering a surprise of 15.59%.
Over the last four quarters, the company has surpassed consensus EPS estimates two times. Union Pacific, which belongs to the Zacks Transportation - Rail industry, posted revenues of $4.24 billion for the quarter ended June 2020, missing the Zacks Consensus Estimate by 3.53%. This compares to year-ago revenues of $5.60 billion. The company has topped consensus revenue estimates two times over the last four quarters.
The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Union Pacific shares have lost about 0.8% since the beginning of the year versus the S&P 500's gain of 1.4%.
What's Next for Union Pacific?
While Union Pacific has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.
Read the full article here
Union Pacific (UNP) came out with quarterly earnings of $1.67 per share, beating the Zacks Consensus Estimate of $1.61 per share. This compares to earnings of $2.22 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of 3.73%. A quarter ago, it was expected that this railroad would post earnings of $1.86 per share when it actually produced earnings of $2.15, delivering a surprise of 15.59%.
Over the last four quarters, the company has surpassed consensus EPS estimates two times. Union Pacific, which belongs to the Zacks Transportation - Rail industry, posted revenues of $4.24 billion for the quarter ended June 2020, missing the Zacks Consensus Estimate by 3.53%. This compares to year-ago revenues of $5.60 billion. The company has topped consensus revenue estimates two times over the last four quarters.
The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Union Pacific shares have lost about 0.8% since the beginning of the year versus the S&P 500's gain of 1.4%.
What's Next for Union Pacific?
While Union Pacific has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.
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 $132.10 per Union Pacific stock (down from our 1st quarter 2020 earnings report valuation of Union Pacific). We therefore believe the stock of Union Pacific is overvalued.
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 $132.10. We therefore believe a good entry point into Union Pacific is at $118.90 or below. We expect the stock of Union Pacific to pull back from current levels to levels closer to our target price (full value price) in coming weeks and months.
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 $132.10. We therefore believe a good entry point into Union Pacific is at $118.90 or below. We expect the stock of Union Pacific to pull back from current levels to levels closer to our target price (full value price) in coming weeks and months.
Next earnings release of Union Pacific
It is expected that Union Pacific will release their 3rd quarter 2020 earnings report at the end of October 2020