Union Pacific Beats Q1 Estimates; Expects Pressure From Rising Fuel Prices

Union Pacific Corp UNP reported first-quarter operating revenue growth of 17% year-over-year to $5.86 billion, above the consensus of $5.69 billion.
The revenue increase was driven by higher fuel surcharge revenue, volume growth, core pricing gains, and a positive business mix.
Freight Revenues increased by 17% Y/Y to $5.44 billion, with Bulk +21%, Industrial +16%, and Premium +14%.
As measured by total revenue carloads, business volumes were up 4%.
EPS of $2.57 topped the consensus of $2.55.
Operating expenses increased by 16% Y/Y to $3.48 billion, and the operating ratio was 59.4%, an improvement of 70 bps.
Operating income increased by 19% Y/Y to $2.38 billion, and margin expanded by 71 bps to 40.6%.
Q1 freight car velocity of 198 daily miles per car, a 5% decline; locomotive productivity was 130 gross ton-miles (GTMs) per horsepower day, a 6% decline. Fuel consumption rate, measured in gallons of fuel per thousand GTMs, was flat.
Union Pacific generated cash from operating activities for Q1 of $2.24 billion, compared to $1.96 billion a year ago. Free cash flow was $657 million.
The company repurchased 11 million shares in the quarter at an aggregate cost of $2.8 billion.
FY22 Guidance: UNP expects an operating ratio beginning with "55", up from ~55.5%.
The company expects to face pressure from rising fuel prices and current operational performance.
It continues to see full-year volume growth exceeding industrial production, incremental margins of mid-60%, and capital spending of $3.3 billion.
Price Action: UNP shares traded lower by 1.00% at $244.60 on the last check Thursday.

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