10-KPeriod: FY2018

UNION PACIFIC CORP Annual Report, Year Ended Dec 31, 2018

Filed February 8, 2019For Securities:UNP

Summary

Union Pacific Corporation (UNP) reported solid performance for the fiscal year ending December 30, 2018. The company experienced an 8% increase in freight revenues, reaching $21.4 billion, driven by a 4% volume growth, higher fuel surcharge revenue, and core pricing gains. This growth was achieved despite declines in coal, grain, and frac sand shipments, as strong performance in intermodal, petroleum products, metals, rock, plastics, and industrial chemicals more than offset these weaker segments. Operationally, the company focused on improving network performance through its "Unified Plan 2020" initiative, which began implementation in the latter half of the year. While average train speed slightly decreased year-over-year, average terminal dwell time improved, indicating enhanced efficiency. The company also continued its focus on safety, though reportable personal injury incidents saw a slight increase. Financially, UNP generated strong operating income and free cash flow, enabling a 20% increase in its quarterly dividend per share. The company remains committed to capital investments to maintain and expand its infrastructure, with a $3.2 billion capital plan for 2019, consistent with 2018.

Financial Highlights

48 data points
Beta

Revenue

$22.83B

Net Income

$5.97B

26.1% Net Margin

EPS (Diluted)

$7.91

Total Assets

$59.15B

Cash & Equivalents

$1.27B

Free Cash Flow

$5.25B

Financial Statements
Beta
Revenue$22.83B
Operating Expenses$14.31B
Operating Income$8.52B
Interest Expense$870.00M
Net Income$5.97B
EPS (Basic)$7.95
EPS (Diluted)$7.91
Shares Outstanding (Basic)750.90M
Shares Outstanding (Diluted)754.30M

Key Highlights

  • 1Freight revenues increased by 8% to $21.4 billion, driven by volume growth, fuel surcharges, and pricing.
  • 2Operating ratio improved to an all-time record of 62.7%.
  • 3Net income was $5.966 billion, or $7.91 per diluted share.
  • 4Free cash flow generated was $2.976 billion.
  • 5The company increased its quarterly dividend per share by 20% to $0.80.
  • 6Implementation of "Unified Plan 2020" began, showing improvements in terminal dwell time in Q4.
  • 7Capital expenditures were $3.2 billion, with a similar plan for 2019 focused on infrastructure renewal and capacity expansion.

Frequently Asked Questions

Union Pacific's freight revenues were primarily driven by growth in international and domestic intermodal, petroleum products, metals, rock, plastics, and industrial chemical shipments. These strong performers more than offset declines in coal, grain, and frac sand volumes.

The company began implementing its "Unified Plan 2020" initiative in late 2018, which led to improvements in operational efficiency, particularly in the fourth quarter. Average terminal dwell time decreased by 2% year-over-year, and improved by 14% in Q4 compared to the first half of 2018. However, average train speed decreased by 4% year-over-year, partly due to network congestion in the first half of the year and Positive Train Control (PTC) implementation.

For 2019, Union Pacific anticipates capital expenditures of approximately $3.2 billion, consistent with 2018. The plan focuses on renewing and improving existing infrastructure, as well as new capacity investments to support future growth and operational efficiency. The company will continue to implement "Unified Plan 2020" initiatives to enhance service reliability and resource utilization. Volume growth is expected to be in the low single digits, with continued margin improvement driven by pricing and productivity.

Union Pacific demonstrated a commitment to shareholder returns by increasing its quarterly dividend per share by 20% in 2018. Additionally, the company actively repurchased shares, repurchasing approximately 57.2 million shares in 2018 for $8.2 billion. A new share repurchase authorization of up to 150 million shares was approved for the period leading up to March 2022.