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Union Pacific's posts mixed Q4 results amid challenging economic landscape

AInvestThursday, Jan 25, 2024 10:40 am ET
2min read

Union Pacific Corp (UNP) released its fourth-quarter earnings report, showcasing an increase in earnings per diluted share (EPS) and net income. However, the full-year results displayed a decline in both metrics. 

Union Pacific's fourth-quarter earnings per share of $2.71 surpassed analysts' estimates of $2.56. Net income for the year declined by 9%. Revenue of $6.16 billion also exceeded the estimated $6.06 billion. Notably, quarterly intermodal revenue of $1.19 billion also exceeded the estimated $1.17 billion. Operating revenue was flat YoY at $6.2 billion in the fourth quarter, primarily driven by increased volume and core pricing gains. However, these factors were offset by reduced fuel surcharge revenue and changes in business mix. Revenue carloads witnessed a 3% increase. 

Union Pacific's operating ratio, a measure of company efficiency, showed improvement by 10 basis points, coming in at 60.9%. Operating income remained flat at $2.4 billion. 

Quarterly freight car velocity experienced a 14% improvement, reaching 217 daily miles per car. Locomotive productivity also increased by 14%, with an average of 140 gross ton-miles per horsepower day. Average maximum train length saw a 2% growth, measuring 9,413 feet. 

Workforce productivity improved by 4% to 1,051 car miles per employee. However, fuel consumption deteriorated by 3%, with a fuel consumption rate of 1.091 gallons per thousand gross ton-miles. 

Looking ahead to 2024, Union Pacific expects its volume outlook to be dampened by various factors. These include a loss in international intermodal business, lower coal demand, and soft economic conditions. However, the company anticipates pricing dollars to exceed inflation dollars.

Union Pacific does not plan to alter its long-term capital allocation strategy and has outlined a capital plan amounting to $3.4 billion. Furthermore, no share repurchases are expected in the first quarter. 

The UNP daily stock chart indicates a consolidating pattern that has been in place since late December, as highlighted by the price movement fluctuating within a narrowing range, suggesting a period of indecision among investors. The stock is currently trading above the 50-day moving average, which often acts as support in an uptrend. The Bollinger Bands appear to be tightening, which often precedes a significant price move. The Relative Strength Index (RSI) is hovering around the midpoint, indicating neither overbought nor oversold conditions. Volume has been varied, with no significant spikes indicating a clear direction. Given the position above the 50-day moving average and the RSI's neutral stance, there might be a slight bullish lean. The narrowing Bollinger Bands suggest caution, as a breakout or breakdown could be imminent following this consolidation phase.

In summary, Union Pacific's fourth-quarter earnings report displayed modest growth in earnings per diluted share and net income. The company navigated through challenges such as reduced fuel surcharge revenue and changes in the business mix. Although the full-year results experienced declines, Union Pacific exhibited improved resource utilization, resulting in strong service metrics during the quarter. Looking ahead, the volume outlook may face obstacles, but the company anticipates positive pricing dynamics.

$UNP(UNP)


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