01—Abstract
Summary
Summary of the 10-K filed February 8, 2019. Cited figures are marked; the original filing is the authoritative source.
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 billiona, 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 billionb capital plan for 2019, consistent with 2018.
02—Key points
Key Highlights
- Freight revenues increased by 8% to $21.4 billion, driven by volume growth, fuel surcharges, and pricing.
- Operating ratio improved to an all-time record of 62.7%.
- Net income was $5.966 billion, or $7.91 per diluted share.
- Free cash flow generated was $2.976 billion.
- The company increased its quarterly dividend per share by 20% to $0.80.
- Implementation of "Unified Plan 2020" began, showing improvements in terminal dwell time in Q4.
- Capital expenditures were $3.2 billion, with a similar plan for 2019 focused on infrastructure renewal and capacity expansion.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 8, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $22.83B$21.24B | +7.5% |
| Operating Expenses | $14.31B$13.13B | +9.0% |
| Operating Income | $8.52B$8.11B | +5.1% |
| Interest Expense | $870.00M$719.00M | +21.0% |
| Net Income | $5.97B$10.71B | −44.3% |
| EPS (Basic) | $7.95$13.42 | −40.8% |
| EPS (Diluted) | $7.91$13.36 | −40.8% |
| Shares Outstanding (Basic) | 750.90M798.40M | −5.9% |
| Shares Outstanding (Diluted) | 754.30M801.70M | −5.9% |
05—Questions
Frequently Asked Questions
What were Union Pacific's main revenue drivers in 2018?
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.
How did Union Pacific's operational efficiency change in 2018?
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.
What is Union Pacific's outlook for 2019 regarding capital expenditures and operations?
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.
What is Union Pacific's approach to returning capital to shareholders?
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.
06—Continue