Omaha, NE-based railroad operator, Union Pacific Corporation’s UNP financial results continue to be hurt by declining coal shipments. As has been the case in the previous few quarters, coal-related issues hampered this key railroad player’s performance in the third quarter of 2016 as well. Due to the lackluster results, shares declined in early trading.
The company’s earnings per share (on an adjusted basis) of $1.36 fell short of the Zacks Consensus Estimate of $1.39. On a year-over-year basis, earnings declined 9%.
Revenues decreased 7% year over year to $5,174 million in the third quarter. The top line edged past the Zacks Consensus Estimate of $5,141.8 million. The bulk of revenues at Union Pacific is derived from freight. A 7% decline in freight revenues led to year-over-year decline in the top line.
As mentioned above, declining coal shipments weighed on the railroad operator’s results yet again. Volumes slipped 6%, mainly due to coal-related woes. Apart from coal, decreasing volumes of industrial products, automotive, chemicals and intermodal also led to the decline. Nonetheless, agricultural product volumes rose 11%.
We note that declining coal shipments have been hurting not only Union Pacific but also other players in the railroad space like Norfolk Southern Corporation NSC, Canadian Pacific Railway Limited CP and Kansas City Southern KSU.
Operating income in the third quarter declined 11% year over year to $2 billion. Operating ratio (defined as operating expenses as a percentage of revenues) came in at 62.1% as against 60.3% a year ago. During the quarter, the company bought back 9 million shares for $851 million.
UNION PAC CORP Price, Consensus and EPS Surprise
UNION PAC CORP Price, Consensus and EPS Surprise | UNION PAC CORP Quote
Segment Details
Agricultural Products freight revenues were $937 million, up 6% year over year. Business volumes increased 11% year over year, while average revenue per car declined 4%.
Automotive freight revenues came in at $485 million, down 8% year over year. Business volumes were down 2% and average revenue per car fell 6% year over year.
Chemicals freight revenues totaled $875 million, down 1% year over year. Volumes were down 1%, whereas average revenue per car improved 1%.
Coal revenues (freight) decreased 19% year over year to $728 million. Volumes declined 14% and average revenue per car fell 6% year over year.
Industrial Products generated freight revenues of $855 million, down 13% year over year due to an 11% volume decline. Average revenue per car was down 2%.
Intermodal segment freight revenues decreased 9% year over year to $957 million and volumes declined 7% year over year. Also, average revenue per car fell 2%.
Other revenues declined 3% to $337 million in the third quarter of 2016.
Liquidity
Union Pacific exited the third quarter with cash and cash equivalents of $1,909 million compared with $1,391 million at the end of 2015. Long-term debt was $15.21 billion at the end of the reported quarter compared with $13.61 billion at the end of 2015. Adjusted debt-to-capitalization ratio increased to 47.7% from 45.7% at year-end 2015.
Currently, Union Pacific has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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