10-QPeriod: Q1 FY2012

UNION PACIFIC CORP Quarterly Report for Q1 Ended Mar 31, 2012

Filed April 19, 2012For Securities:UNP

Summary

Union Pacific Corporation reported a strong first quarter in 2012, with net income increasing significantly to $863 million ($1.79 per diluted share) from $639 million ($1.29 per diluted share) in the prior year's first quarter. This growth was primarily driven by a substantial 14% increase in total operating revenues, reaching $5.11 billion, fueled by robust freight revenue growth of 14% across most commodity groups, especially automotive, chemicals, and industrial products. The company also demonstrated effective cost management, with operating expenses increasing at a slower pace than revenues, leading to an improved operating ratio of 70.5% compared to 74.7% in the prior year. Investors can take comfort in Union Pacific's ability to translate revenue growth into bottom-line profit, supported by strong operational execution. The company's strategic focus on core pricing gains and managing fuel surcharges, alongside disciplined cost controls, positions it well for continued profitability. The increase in dividends declared per share and ongoing share repurchases further signal a commitment to returning value to shareholders.

Financial Highlights

47 data points
Beta

Revenue

$5.11B

Net Income

$863.00M

16.9% Net Margin

EPS (Diluted)

$0.90

Total Assets

$45.34B

Cash & Equivalents

$995.00M

Free Cash Flow

$600.00M

Financial Statements
Beta
Revenue$5.11B
Operating Expenses$3.60B
Operating Income$1.51B
Interest Expense$135.00M
Net Income$863.00M
EPS (Basic)$0.91
EPS (Diluted)$0.90
Shares Outstanding (Basic)955.60M
Shares Outstanding (Diluted)962.80M

Key Highlights

  • 1Net income surged by 35% year-over-year to $863 million, with diluted EPS rising to $1.79 from $1.29.
  • 2Total operating revenues grew 14% to $5.11 billion, primarily driven by a 14% increase in freight revenues across diversified commodity groups.
  • 3The operating ratio improved significantly by 4.2 percentage points to 70.5%, indicating enhanced operational efficiency.
  • 4Capital expenditures increased by 34% to $804 million, reflecting continued investment in infrastructure and growth areas.
  • 5Shareholders benefited from increased capital returns, with dividends declared per share rising to $0.60 from $0.38 and significant share repurchases totaling $433 million in the quarter.
  • 6Despite a 12% increase in fuel costs, the company effectively managed expenses, leading to improved profitability.

Frequently Asked Questions

The primary drivers for the substantial increase in net income were a 14% rise in total operating revenues, largely due to strong freight revenue growth across diverse commodity groups, and an improved operating ratio of 70.5% resulting from effective cost management and operational efficiencies, which outpaced the rise in operating expenses.

While fuel costs increased by 12% year-over-year, Union Pacific mitigated their impact through a combination of core pricing gains, improved fuel surcharge provisions in contracts, and a 2% improvement in fuel consumption rate. These measures helped to largely offset the higher per-gallon fuel prices.

Union Pacific is making significant investments in its infrastructure and growth areas, with capital expenditures increasing to $804 million in the quarter. Simultaneously, the company is committed to returning value to shareholders through increased dividends, as evidenced by the rise in dividends declared per share, and through a robust share repurchase program, with $433 million in repurchases during the quarter.

Performance was strong across most commodity groups. Automotive, chemicals, and industrial products saw significant revenue growth (26%, 16%, and 25% respectively). Energy revenue saw a modest 5% increase despite lower coal shipments, while agricultural products grew 6% and intermodal increased 15%. The diversification of its freight base helped to offset declines in specific sub-sectors.