01—Abstract
Summary
Summary of the 10-Q filed July 20, 2012. Cited figures are marked; the original filing is the authoritative source.
Union Pacific Corporation (UNP) reported a strong second quarter and first half of 2012, demonstrating robust financial performance with record earnings per diluted share of $2.10a and net income of $1 billion for the quarter ending June 30, 2012.
Year-to-date, net income reached $1.9 billionb, a significant increase from the prior year. The company experienced substantial growth in freight revenues, up 7% for the quarter and 10% year-to-date, driven by core pricing gains, higher fuel surcharge recoveries, and increased volumes in key sectors like automotive, chemicals, industrial products, and intermodal, offsetting declines in coal and agricultural shipments. Operating expenses saw a modest increase of 1% for the quarter, with management highlighting effective cost controls despite inflationary pressures and higher fuel costs in the year-to-date period.
The operating ratio improved significantly, reaching a record low of 67.0%c for the quarter, reflecting the company's operational efficiency. Union Pacific also continued to return value to shareholders through an increased dividend payout and a robust share repurchase program, underscoring its financial strength and commitment to shareholder returns.
02—Key points
Key Highlights
- Record quarterly earnings per diluted share of $2.10 and net income of $1 billion for Q2 2012.
- Freight revenues increased 7% year-over-year for Q2 2012, reaching $4.913 billion, driven by pricing, fuel surcharges, and volume growth in several key commodity groups.
- Operating expenses were well-controlled, increasing only 1% for the quarter, leading to a record-low operating ratio of 67.0%.
- The company's capital plan for 2012 projects new capital investments of approximately $3.6 billion to support infrastructure and capacity expansion.
- Total operating revenues for the six months ended June 30, 2012, increased 11% to $10.333 billion.
- Cash provided by operating activities increased to $2.776 billion for the first six months of 2012, up from $2.640 billion in the prior year.
- Shareholder returns were strong, with dividends paid increasing and significant share repurchases continuing under the authorized program.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2012filed July 20, 2012Financial Statements
Q2 FY2012 against Q2 FY2011
| Line item | Q2 FY2012Q2 FY2011 | Change |
|---|---|---|
| Revenue | $5.22B$4.86B | +7.5% |
| Operating Expenses | $3.50B$3.47B | +0.9% |
| Operating Income | $1.72B$1.39B | +23.9% |
| Interest Expense | $135.00M$148.00M | −8.8% |
| Net Income | $1.00B$785.00M | +27.6% |
| EPS (Basic) | $1.05$0.81 | +31.1% |
| EPS (Diluted) | $1.05$0.80 | +32.1% |
| Shares Outstanding (Basic) | 947.60M976.80M | −3.0% |
| Shares Outstanding (Diluted) | 954.40M984.80M | −3.1% |
05—Questions
Frequently Asked Questions
What was Union Pacific's financial performance like in the second quarter of 2012 compared to the second quarter of 2011?
Union Pacific reported significantly improved financial performance. Net income rose to $1 billion from $785 million, and earnings per diluted share increased to $2.10 from $1.59. Freight revenues grew by 7% to $4.913 billion, driven by a combination of core pricing gains, higher fuel surcharge recoveries, and increased volumes in sectors like automotive, chemicals, and intermodal. Operating expenses saw only a 1% increase, resulting in a record-low operating ratio of 67.0%.
What were the key drivers of revenue growth for Union Pacific in the reported period?
Revenue growth was primarily driven by core pricing gains, higher fuel surcharge recoveries, and increases in shipment volumes. Key commodity groups like automotive, chemicals, industrial products, and intermodal showed notable growth. While coal and agricultural volumes declined, strong performance in other sectors more than compensated.
How is Union Pacific managing its operating expenses?
Union Pacific demonstrated effective cost control. While operating expenses increased slightly by 1% for the quarter, the company managed to improve its operating ratio significantly due to strong revenue growth and operational efficiencies. Management highlighted efforts in operational improvements, cost reductions, and managing inflation. Specific expense categories like fuel saw a decrease in price for the quarter, although year-to-date fuel costs increased.
What is the company's outlook and capital investment plan?
For 2012, Union Pacific plans approximately $3.6 billion in new capital investments, with additional expenditures for early lease buyouts of locomotives. These investments are aimed at supporting infrastructure and capacity expansion. The company expressed confidence in its operational efficiency and its ability to manage costs and drive returns, as evidenced by its record financial results.
06—Continue