Union Pacific Corporation UNP reported third-quarter 2015 earnings of $1.50 per share, which came in well above the Zacks Consensus Estimate of $1.43. Earnings, however, declined 2% on a year-over-year basis. Figures have been adjusted in view of the two-for-one stock split carried out by the company in 2014.
Revenues decreased 10% year over year to $5.56 billion in the third quarter, falling short of the Zacks Consensus Estimate of $5.65 billion. The bulk of revenues came from freight revenues. A 10% decline in freight revenues hurt the top line. Declining coal shipments weighed on the railroad operator’s results yet again. Volumes slipped 6%, with coal being the biggest culprit. Apart from coal, decreasing volumes of industrial products and agricultural products also led to the decline.
Operating income went down 5% year over year to $2.2 billion. Operating ratio (defined as operating expenses as a percentage of revenues) improved to 60.3% from 62.3% a year ago. During the quarter, the company bought back 13.8 million shares for more than $1.2 billion.
Segment Details
Agricultural freight revenues were $880 million, down 4% year over year. Business volumes decreased 3% year over year and average revenue per car declined 1%.
Automotive accounted for $529 million of freight revenues, flat year over year. Business volumes were up 5% year over year and average revenue per car fell 5% year over year.
Chemical contributed $882 million to freight revenues, down 6% year over year. Volumes declined 3% year over year. Average revenue per car dropped 3% year over year.
Coal revenues (freight) decreased 18% year over year to $898 million. Volumes declined 15% and average revenue per car fell 4% year over year.
Industrial Products generated freight revenues of $979 million, down 16% year over year on a 12% volume decline. Average revenue per car was down 4% year over year.
Intermodal segment freight revenues went down 11% year over year to $1.1 billion and volumes declined 4% year over year. Average revenue per car fell 7% year over year.
Other revenues declined 4% year over year to $347 million.
Liquidity
Union Pacific exited the third quarter of 2015 with cash and cash equivalents of $1,078 million, compared with $1,586 million at the end of 2014. Long-term debt stood at $12.8 billion in the third quarter of 2015 against $11 billion at the end of 2014. Adjusted debt-to-capitalization ratio increased to 44.5% from 41.3% at 2014 end.
Upcoming Release
Another transportation stock, Norfolk Southern Corp. NSC, will report results on Oct 28.
Zacks Rank
Currently, Union Pacific has a Zacks Rank #3 (Hold). Some better-ranked stocks in the transportation space are Ryanair Holdings RYAAY and Virgin America VA, both sporting a Zacks Rank #1 (Strong Buy).
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