Key Points
- EPS of $2.74 beat estimates by $0.04.
- Total revenue of $6.0 billion missed estimates by about $43 million.
- The railway company's operating ratio improved by 3 percentage points to 60%.
Union Pacific (UNP -0.13%), a leading freight railroad company, released its second-quarter 2024 earnings on July 25. Earnings per share of $2.74 topped analysts' consensus estimate of $2.70 by 1.5%, but total revenue of $6.0 billion came in 0.7% below the consensus estimate. The results reflected management's strong focus on profitability, though the top-line figure highlights ongoing economic issues affecting freight demand.
| Metric | Q2 2024 Result | Q2 2024 Estimate | Q2 2023 Result | % Change (YoY) |
|---|---|---|---|---|
| Earnings per share | $2.74 | $2.70 | $2.57 | 7% |
| Total revenue | $6.007 billion | $6.05 billion | $5.963 billion | 1% |
| Operating ratio | 60.0% | — | 63.0% | (300 basis points) |
| Net income | $1.7 billion | — | $1.6 billion | 7% |
| Source: Analyst estimates for the quarter provided by FactSet. |
Union Pacific Business Overview
Union Pacific is one of America's leading transportation companies, operating a vast rail network covering 23 Western states. It specializes in freight services through three main segments: bulk, industrial, and premium. Recently, management has focused on boosting prices, increasing operational efficiency, sustainability, and strategic growth in various markets.
Key Developments and Metrics
Financial performance varied across Union Pacific's business segments:
The bulk segment generated $1.7 billion in revenue, down 2% year over year. The drop-off was entirely due to a 21% decline in the coal and renewables category. However, most of that slump was offset by growth in fertilizers (11%), food and refrigerated goods (9%), and grain and grain products (1%) -- that last being by far the largest category in the segment.
Industrial revenue rose 2% to $2.1 billion, driven by a 9% rise in industrial chemicals and plastics, and a 4% increase in energy and specialized markets. The premium segment grew by 4% to $1.8 billion, with automotive revenue up 5% and intermodal up 3%.
Operational efficiency remained a highlight for Union Pacific. The operating ratio improved to 60%, a 300 basis point reduction from last year's 63%. (Operating ratio measures how much of a company's revenue goes toward expenses and costs of goods, so a lower ratio is better.) Improvements were also noted in locomotive productivity, which increased 6% to 134 gross ton-miles per horsepower day, and average train length, which rose 2% to 9,544 feet. Workforce productivity rose by 5%, reaching 1,031 car miles per employee.
Looking Ahead: Financial Outlook and Investor Focus
Management expressed caution about the remainder of the year, primarily due to uncertain volume outlook, particularly around coal demand and broader economic indicators. However, the company projects continued positive momentum in profitability, aided by improved network efficiency and strategic pricing actions. Its capital allocation strategy remains unchanged, with a continued focus on its $3.4 billion long-term capital investment plan. The company also resumed share repurchases in the quarter.
