Union Pacific Q1 Results Miss Estimates, But Revenue Grows And Derailment Rate Improves

Union Pacific Corp UNP reported first-quarter FY23 operating revenue growth of 3.3% year-over-year to $6.06 billion, missing the consensus of $6.07 billion.

• The revenue increase was driven by higher fuel surcharge revenue and core pricing gains, partially offset by a negative business mix and volume declines.
• Freight revenues increased 4% Y/Y to $5.66 billion, with Bulk +4%, Industrial +5%, and Premium +3%.
• Adjusted EPS of $2.54 missed the consensus of $2.59.
• Operating expenses increased 8% Y/Y to $3.76 billion, and the operating ratio was 62.1%, which deteriorated by 270 bps.
• Operating income declined 3.5% Y/Y to $2.29 billion, and the margin contracted by 268 bps to 37.9%.
• The company reported Q1 freight car velocity of 196 daily miles per car, a 1% decline, and locomotive productivity of 123 gross ton-miles (GTMs) per horsepower day, a 5% decline.
• UNP's reportable derailment rate improved by 10% to 2.21 per million train miles compared to 2.46 for 2022.
• The Omaha, Nebraska-based company repurchased 2.9 million shares in the quarter at an aggregate cost of $600 million. Union Pacific generated cash from operating activities of $1.84 billion in the quarter versus $2.24 billion a year ago. Free cash flow was $240 million.
• "We delivered greater network fluidity and resiliency in the first quarter even as we faced a series of significant weather events," stated Union Pacific CEO Lance Fritz.
• "In addition to the impact of weather on carload volumes and costs, higher inflation also reduced our operating income and more than offset our record first quarter operating revenue," added Fritz.
• FY23 Guidance, reaffirmed: UNP expects carloads to exceed industrial production (current industrial production forecast -0.7%).
• The company expects capital spending to be less than 15% of revenue and sees improvement in the operating ratio.
• Price Action: UNP shares are trading higher by 0.71% at $203.44 premarket on Thursday..

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Image: Courtesy of Union Pacific