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Category: Union Pacific (UNP)
Date: 25 January 2021 Stock Price of Union Pacific: $207.13 We take a look at freight rail transport company, Union Pacific's earnings report for the 4th quarter of their 2020 fiscal year in order to determine what their stock is worth. Revenues reported for the quarter came in at $5.14 billion and net income at $1.38 billion.
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Our third quarter results represent another step in our company’s transformation. We demonstrated our ability to efficiently adjust to a sharp rebound in volume, which increased 19% from the second quarter, while operating expenses, excluding fuel price changes, increased only 11% sequentially-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 4th quarter 2020 earnings report
The numbers below refers to the latest quarter's data unless specified otherwise
Freight Revenues (in millions)
- Total operating revenues: $4.919 billion (down from $5.516 billion for the same quarter of the previous year)
- Total operating revenues are down by -11% over the last 12 months
- Total operating expenses: $2.888 billion (down from $3.282 billion for the same quarter of the previous year)
- Total operating expenses decreased by -12% over the last 12 months
- Some margin gain for Union Pacific with their revenues decreasing at a slower rate than their operating expenses
- Net Income: $ 1.363 billion (down from $ 1.555 billion for the same quarter of the previous year)
- Diluted earnings per share: $2.01 (down from $2.22 for the same quarter of the previous year)
- PE ratio of Union Pacific: 22.9
- Weighted average number of shares - diluted: 667.8 million (down from 701.9 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: $2.601 billion
- Cash and cash equivalents per share: $3.89
- Cash and cash equivalents makes up 2.2% of Union Pacific's market capital
- Cash and cash equivalents makes up 4.1% of Union Pacific's total assets
- Stockholders' equity in Union Pacific : $17.199 billion
- Stockholders equity per share: $25.76
- So Union Pacific is trading at 6.87 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: 1 478
- Industrial: 1 567
- Premium: 1 551
- Total: 4 596
Union Pacific (UNP) management commentary on their 4th quarter 2020 earnings
Omaha, Neb., January 21, 2021 – Union Pacific Corporation (NYSE: UNP) today reported 2020 fourth quarter net income of $1.4 billion, or $2.05 per diluted share. These results include a previously announced $278 million pre-tax, non-cash impairment charge. Excluding the effects of that charge, adjusted fourth quarter net income was $1.6 billion, or $2.36 per diluted share. This compares to $1.4 billion, or $2.02 per diluted share, in the fourth quarter 2019.
“These outstanding results demonstrate the true potential of our franchise as we leveraged all three profitability drivers simultaneously – volume growth, productivity, and pricing – to produce record fourth quarter results,” said Lance Fritz, Union Pacific chairman, president, and chief executive officer. “The women and men of Union Pacific persevered throughout the pandemic to provide our customers with a safe, reliable, and consistent service product.”
“These outstanding results demonstrate the true potential of our franchise as we leveraged all three profitability drivers simultaneously – volume growth, productivity, and pricing – to produce record fourth quarter results,” said Lance Fritz, Union Pacific chairman, president, and chief executive officer. “The women and men of Union Pacific persevered throughout the pandemic to provide our customers with a safe, reliable, and consistent service product.”
Fourth Quarter Summary
Operating revenue of $5.1 billion was down 1% in fourth quarter 2020 compared to fourth quarter 2019. Fourth quarter business volumes, as measured by total revenue carloads, increased 3% compared to 2019. Premium volumes increased compared to 2019, while bulk was flat and industrial declined. In addition:
Summary of Fourth Quarter Freight Revenues
Operating revenue of $5.1 billion was down 1% in fourth quarter 2020 compared to fourth quarter 2019. Fourth quarter business volumes, as measured by total revenue carloads, increased 3% compared to 2019. Premium volumes increased compared to 2019, while bulk was flat and industrial declined. In addition:
- Quarterly freight revenue declined 1% compared to fourth quarter 2019, as volume growth and core pricing gains were more than offset by decreased fuel surcharge revenue and a less favorable business mix.
- Union Pacific’s 61.0% reported operating ratio when adjusted for the impairment charge is an all-time quarterly record of 55.6%, 410 basis points lower than fourth quarter 2019. Lower fuel prices positively impacted the operating ratio by 90 basis points.
- Quarterly freight car velocity was 223 daily miles per car, a 1% improvement compared to fourth quarter 2019.
- Quarterly locomotive productivity was 142 gross ton-miles per horsepower day, a 13% improvement compared to fourth quarter 2019.
- Quarterly workforce productivity was 1,032 car miles per employee, an 18% improvement compared to fourth quarter 2019.
- Average maximum train length was 9,154 feet, a 12% increase compared to fourth quarter 2019.
- The Company repurchased 3.8 million shares in fourth quarter 2020 at an aggregate cost of $749 million.
Summary of Fourth Quarter Freight Revenues
- Bulk up 1%
- Industrial down 7%
- Premium up 5%
Union Pacific (UNP) stock price chart over the last 5 years
The image below shows the stock price history of Union Pacific over the last 5 years. And its been a good time for Union Pacific stockholders with the stock increasing sharply by 163.3% over the last 5 years.
The stock of Union Pacific is trading at a lot closer to its 52 week high than it is to its 52 week low which is a clear indication that the short term sentiment and momentum of Union Pacific's stock positive at this point in time.
The stock of Union Pacific is trading at a lot closer to its 52 week high than it is to its 52 week low which is a clear indication that the short term sentiment and momentum of Union Pacific's stock positive at this point in time.
Union Pacific (UNP) vs Norfolk Southern (NSC) vs Kansas City Southern (KSU) stock over the last 5 years
The image below shows the stock price performance of Union Pacific (UNP) vs Norfolk Southern (NSC) vs Kansas City Southern (KSU) stock over the last 5 years. All three freight rail operators active in the USA. And as the image shows the stock price performance of the three freight rail operators are very similar. The summary below shows the stock price returns provided by each stock over the last 5 years:
- Norfolk Southern (NSC): 226.4
- Kansas City Southern (KSU): 170.3%
- Union Pacific (UNP): 163.3%
Union Pacific (UNP) latest stock valuation
Based on Union Pacific's latest earnings report and their outlook our valuation model provides a target price (full value price) at $163.10 per Union Pacific stock (up from our 3rd 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 $163.10. We therefore believe a good entry point into Union Pacific is at $146.80 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 $163.10. We therefore believe a good entry point into Union Pacific is at $146.80 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 (UNP)
It is expected that Union Pacific will release their 1st quarter 2021 earnings report at the end of April 2021