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Why Is Union Pacific (UNP) Down 4.1% Since Last Earnings Report?
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It has been about a month since the last earnings report for Union Pacific (UNP - Free Report) . Shares have lost about 4.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Union Pacific due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Earnings Miss at Union Pacific in Q2
Union Pacific's second-quarter 2023 earnings of $2.57 per share missed the Zacks Consensus Estimate of $2.75. Moreover, the bottom line plunged 12.3% on a year-over-year basis.
Operating revenues of $5,963 million missed the Zacks Consensus Estimate of $6,121.3 million. The top line tumbled 4.9% on a year-over-year basis due to reduced fuel surcharge revenues, lower volumes and an unfavorable business mix.
Freight revenues, accounted for 93.4% of the top line, decreased 5% to $5,569 million. The metric fell short of our projection of $5,719.5 million. Other revenues declined 8% to $394 million in the second quarter and lagged our expectation of $412.9 million. Business volumes, measured by total revenue carloads, were down 2%.
Operating income in the second quarter declined 12% year over year to $2.2 billion.
Total operating expenses of $3,759 million remained almost flat year over year. Fuel expenses plunged 29%. Expenses on purchased services and materials increased 5%. Compensation and benefits climbed 16% year over year. The other cost items grew 6% year over year.
The operating ratio (operating expenses as a percentage of revenues) improved by 280 basis points to 63%. Falling fuel prices in the quarter, however, positively impacted the operating ratio by 190 basis points.
Segmental Performance
Bulk (Grain & grain products, Fertilizer, Food & refrigerated, Coal & renewables) freight revenues were $1,757 million, down 3% year over year. The actual percentage decline was lesser than our expectation of a 6.4% year-over-year fall. Segmental revenue carloads declined 1% year over year.
Industrial freight revenues totaled $2,086 million, remained almost unchanged year over year. We estimated a 3.9% decline from second-quarter 2022 actuals. Segmental revenue carloads rose 1% year over year.
Freight revenues in the Premium division were $1,726 million, down 11% year over year. Segmental revenue carloads fell 4% year over year.
Liquidity & Buyback
Union Pacific exited second-quarter 2023 with cash and cash equivalents of $830 million compared with $973 million at the end of 2022. Debt (due after a year) decreased to $31,557 million at the second-quarter end from $31,648 million at 2022 end.
In the reported quarter, Union Pacific repurchased 600,000 shares at an aggregate cost of $120 million.
2023 Outlook
Capital expenditure is still projected to be $3.6 billion.
Management also expects to maintain a dividend of $1.30 per quarter. UNP has no plans to make further share buybacks this year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -7.16% due to these changes.
VGM Scores
Currently, Union Pacific has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Union Pacific has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Why Is Union Pacific (UNP) Down 4.1% Since Last Earnings Report?
It has been about a month since the last earnings report for Union Pacific (UNP - Free Report) . Shares have lost about 4.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Union Pacific due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Earnings Miss at Union Pacific in Q2
Union Pacific's second-quarter 2023 earnings of $2.57 per share missed the Zacks Consensus Estimate of $2.75. Moreover, the bottom line plunged 12.3% on a year-over-year basis.
Operating revenues of $5,963 million missed the Zacks Consensus Estimate of $6,121.3 million. The top line tumbled 4.9% on a year-over-year basis due to reduced fuel surcharge revenues, lower volumes and an unfavorable business mix.
Freight revenues, accounted for 93.4% of the top line, decreased 5% to $5,569 million. The metric fell short of our projection of $5,719.5 million. Other revenues declined 8% to $394 million in the second quarter and lagged our expectation of $412.9 million. Business volumes, measured by total revenue carloads, were down 2%.
Operating income in the second quarter declined 12% year over year to $2.2 billion.
Total operating expenses of $3,759 million remained almost flat year over year. Fuel expenses plunged 29%. Expenses on purchased services and materials increased 5%. Compensation and benefits climbed 16% year over year. The other cost items grew 6% year over year.
The operating ratio (operating expenses as a percentage of revenues) improved by 280 basis points to 63%. Falling fuel prices in the quarter, however, positively impacted the operating ratio by 190 basis points.
Segmental Performance
Bulk (Grain & grain products, Fertilizer, Food & refrigerated, Coal & renewables) freight revenues were $1,757 million, down 3% year over year. The actual percentage decline was lesser than our expectation of a 6.4% year-over-year fall. Segmental revenue carloads declined 1% year over year.
Industrial freight revenues totaled $2,086 million, remained almost unchanged year over year. We estimated a 3.9% decline from second-quarter 2022 actuals. Segmental revenue carloads rose 1% year over year.
Freight revenues in the Premium division were $1,726 million, down 11% year over year. Segmental revenue carloads fell 4% year over year.
Liquidity & Buyback
Union Pacific exited second-quarter 2023 with cash and cash equivalents of $830 million compared with $973 million at the end of 2022. Debt (due after a year) decreased to $31,557 million at the second-quarter end from $31,648 million at 2022 end.
In the reported quarter, Union Pacific repurchased 600,000 shares at an aggregate cost of $120 million.
2023 Outlook
Capital expenditure is still projected to be $3.6 billion.
Management also expects to maintain a dividend of $1.30 per quarter. UNP has no plans to make further share buybacks this year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -7.16% due to these changes.
VGM Scores
Currently, Union Pacific has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Union Pacific has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.