Union Pacific Q3: 10% Revenue Decline, Lower Volumes, Inflationary Pressures & More

Union Pacific Corporation UNP reported a third-quarter FY23 operating revenue decline of 10% year-over-year to $5.941 billion, missing the consensus of $5.99 billion.

The decrease in revenue was driven by reduced fuel surcharge revenue, lower volumes, and business mix, partially offset by core pricing gains.

Freight revenues decrease 9% Y/Y to $5.55 billion, with Bulk -10%, Industrial -6% and Premium -12%.

EPS was $2.51 (-18% Y/Y), beating the consensus of $2.44.

The operating ratio was 63.4%, up 350 basis points compared to 3Q22. Operating income declined 17% Y/Y to $2.18 billion.

The company reported Q3 freight car velocity of 200 daily miles per car, an improvement of 5%, and locomotive productivity of 129 gross ton-miles (GTMs) per horsepower day, a 4% improvement.

Average fuel price per gallon consumed declined by 21% Y/Y to $3.21.

UNP's Q3 workforce productivity decreased by 6% to 985 car miles per employee.

Union Pacific generated operating cash flow year-to-date of $5.98 billion versus $7.07 billion a year ago. Free cash flow was $954 million.

"We faced many challenges in the quarter, including continued inflationary pressures and a drop in carloads. Operationally we gained momentum through the quarter, which positions us to provide our customers with great service. Operating and safety metrics are showing solid improvement, as we increase asset utilization," commented Jim Vena, Union Pacific's Chief Executive Officer.

UNP expects softness in consumer-related volumes to likely drive full-year volume expectations below Industrial Production (current forecast: 0.0%).

Price Action: UNP shares are trading higher by 2.81% at $211.70 on the last check Thursday.