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Category: Stock Market and Union Pacific
Date: 26 January 2020 Stock Price: $185.68 We take a look at transport company, Union Pacific's earnings report for the 4th 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 3rd 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
Overview of Union Pacific's 4th quarter 2019 earnings report
The numbers below refers to the latest quarter's data unless specified otherwise
Freight Revenues (in millions)
- Total operating revenues: $5.212 billion (down 9% from $5.757 billion for the same quarter of the previous year)
- Total operating expenses: $3.112 billion (down 12% from $3.547 billion for the same quarter of the previous year)
- Net Income: $ 1.413 billion (down 10% from $ 1.554 billion for the same quarter of the previous year)
- Diluted earnings per share: $ 2.02 (down 5% from $2.12 for the same quarter of the previous year)
- PE ratio of Union Pacific: 22.1
- Weighted average number of shares - diluted: 694.9 million (down from 732.9 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)
- Dividend yield of Union Pacific: 2.1%
- Cash and cash equivalents: $831 million
- Cash and cash equivalents per share: $1.78
- Cash and cash equivalents makes up 0.96% of Union Pacific's market capital
- Cash and cash equivalents makes up 1.34% of Union Pacific's total assets
- Stockholders' equity in Union Pacific : $18.128 billion
- Stockholders equity per share: $26.08
- So Union Pacific is trading at 7.12 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.
Freight Revenues (in millions)
- Agricultural Products: 1 099
- Energy: 838
- Industrial: 1 407
- Premium: 1 507
- Total: 4 851
Union Pacific (UNP) management commentary on their 4th quarter 2019 earnings
OMAHA, NEB., JANUARY 23, 2020 Union Pacific Corporation (NYSE: UNP) today reported 2019 fourth quarter net income of $1.4 billion, or $2.02 per diluted share. This compares to $1.6 billion, or $2.12 per diluted share, in the fourth quarter 2018.
"Given the challenging volume environment, we leveraged strong productivity to deliver solid financial results including the third consecutive quarter with an operating ratio below 60 percent," said Lance Fritz, Union Pacific chairman, president and chief executive officer. "The work our employees are doing as part of Unified Plan 2020 has been transformational and key to providing a safe, reliable and consistent service product for our customers."
"Given the challenging volume environment, we leveraged strong productivity to deliver solid financial results including the third consecutive quarter with an operating ratio below 60 percent," said Lance Fritz, Union Pacific chairman, president and chief executive officer. "The work our employees are doing as part of Unified Plan 2020 has been transformational and key to providing a safe, reliable and consistent service product for our customers."
Fourth quarter summary
Summary of Fourth Quarter Freight Revenues
A few full year 2019 highlights
2020 Outlook
"While we are pleased with our progress in providing a highly consistent, reliable and efficient service product for our customers, we must improve our safety results," Fritz said. "As always, we remain focused on growing the business and improving margins while driving shareholder returns.
- Quarterly freight revenue declined 10 percent, compared to fourth quarter 2018, as core pricing gains and a positive business mix were offset by lower volumes and decreased fuel surcharge revenue.
- Union Pacific’s 59.7 percent operating ratio represented a fourth quarter record and the third consecutive quarter below 60 percent, improving 1.9 points compared to fourth quarter 2018.
- The $2.16 per gallon average quarterly diesel fuel price in fourth quarter 2019 was 7 percent lower than fourth quarter 2018.
- Quarterly freight car velocity was 220 daily miles per car, a 5 percent improvement compared to fourth quarter 2018.
- Terminal dwell was 23.3 hours, a 13 percent improvement compared to fourth quarter 2018.
- The Company repurchased 3.6 million shares in fourth quarter 2019 at an aggregate cost of $599 million.
Summary of Fourth Quarter Freight Revenues
- Industrial flat
- Agricultural Products down 2 percent
- Premium down 14 percent
- Energy down 25 percent
A few full year 2019 highlights
- Freight car velocity was 208 daily miles per car, a 6 percent improvement compared to full year 2018.
- Terminal dwell was 24.8 hours, a 17 percent improvement compared to full year 2018.
- Union Pacific’s reportable personal injury rate of 0.90 incidents per 200,000 employee hours increased 11 percent compared to full year 2018.
- Union Pacific’s capital program in 2019 totaled $3.2 billion.
- Union Pacific repurchased 35 million shares in 2019 at an aggregate cost of $5.8 billion.
2020 Outlook
"While we are pleased with our progress in providing a highly consistent, reliable and efficient service product for our customers, we must improve our safety results," Fritz said. "As always, we remain focused on growing the business and improving margins while driving shareholder returns.
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 $117.20 and its currently trading at $185.68 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 $149.09 which to us is a clear indication that the short term sentiment and momentum of Union Pacific's stock is very 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 $149.09 which to us is a clear indication that the short term sentiment and momentum of Union Pacific's stock is very positive.
Recent coverage of Union Pacific
The extract below regarding Union Pacific's latest earnings was obtained from TheStreet.com
Shares of Union Pacific (UNP) - Get Report were off 1.2% to $184.90 Friday as analysts reacted to the railroad company's latest earnings, which missed Wall Street forecasts. The Omaha, Nebraska-based company reported fourth-quarter earnings of $1.4 billion, or $2.02 a share, down from $2.12 a share a year ago. Analysts were looking for earnings of $2.07 a share. Revenue was $5.21 billion, down 9.5% from a year ago, and short of Wall Street's call for $5.22 billion.
“Given the challenging volume environment, we leveraged strong productivity to deliver solid financial results including the third consecutive quarter with an operating ratio below 60 percent,” Lance Fritz, chairman, president and CEO, said in a statement. Union Pacific said that it plans to reduce its average number of workers by around 8% in 2020 after cutting its staffing by 11% in 2019. The company had about 37,500 workers during 2019 and almost 42,000 during 2018.
For 2019, Union Pacific reported net income of $5.9 billion, or $8.38 a share, a 1% decrease and 6% increase, respectively, from 2018.
Read the full article here
Shares of Union Pacific (UNP) - Get Report were off 1.2% to $184.90 Friday as analysts reacted to the railroad company's latest earnings, which missed Wall Street forecasts. The Omaha, Nebraska-based company reported fourth-quarter earnings of $1.4 billion, or $2.02 a share, down from $2.12 a share a year ago. Analysts were looking for earnings of $2.07 a share. Revenue was $5.21 billion, down 9.5% from a year ago, and short of Wall Street's call for $5.22 billion.
“Given the challenging volume environment, we leveraged strong productivity to deliver solid financial results including the third consecutive quarter with an operating ratio below 60 percent,” Lance Fritz, chairman, president and CEO, said in a statement. Union Pacific said that it plans to reduce its average number of workers by around 8% in 2020 after cutting its staffing by 11% in 2019. The company had about 37,500 workers during 2019 and almost 42,000 during 2018.
For 2019, Union Pacific reported net income of $5.9 billion, or $8.38 a share, a 1% decrease and 6% increase, respectively, from 2018.
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 $147.80 per Union Pacific stock (down from our 3rd quarter 2019 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 $147.80. We therefore believe a good entry point into Union Pacific is at $133 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 $147.80. We therefore believe a good entry point into Union Pacific is at $133 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 1st quarter 2020 earnings report at the end of April 2020