01—Abstract
Summary
Summary of the 10-Q filed October 26, 2017. Cited figures are marked; the original filing is the authoritative source.
Union Pacific Corporation (UNP) reported solid financial results for the nine months ended September 30, 2017, with operating revenues increasing by 7% year-over-year to $15.8 billiona and net income rising by 11% to $3.4 billion.
This growth was driven by increased freight revenues, which saw a 7% uptick, supported by core pricing gains, higher fuel surcharges, and an increase in key commodity volumes like industrial products and coal. The company also demonstrated effective cost management, with operating expenses increasing at a slower pace than revenues, resulting in an improved operating ratio for the year-to-date period. For the third quarter, the company reported a 5% increase in total operating revenues to $5.4 billionb, with net income reaching $1.2 billion, a 5.6% increase year-over-year.
Despite a slight dip in overall carloadings, a higher average revenue per car (ARC) compensated for this, indicating successful revenue management strategies. Management has also continued to focus on productivity initiatives, with a 2%c decrease in workforce levels offsetting a 1% decline in volumes during the third quarter. The company remains committed to shareholder returns, actively engaging in share repurchases and paying dividends.
02—Key points
Key Highlights
- Total operating revenues for the nine months ended September 30, 2017, increased by 7% to $15.8 billion, compared to $14.8 billion in the prior year.
- Net income for the nine months increased by 11% to $3.4 billion, or $4.26 per diluted share, up from $3.1 billion, or $3.68 per diluted share, in the same period of 2016.
- Freight revenues for the third quarter of 2017 grew by 4% to $5.1 billion, driven by a 5% increase in average revenue per car (ARC), which offset a 1% decline in volume.
- Operating expenses increased by 6% for the third quarter, but the operating ratio improved year-over-year for the nine-month period to 63.2% from 64.1%.
- The company repurchased approximately 27.1 million shares of common stock during the first nine months of 2017 under its new $12.0 billion share repurchase program.
- Cash provided by operating activities for the first nine months was $5.4 billion, while free cash flow was $1.7 billion.
- The company reported a workforce reduction plan in the third quarter, resulting in an $84 million pre-tax charge.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2017filed October 26, 2017Financial Statements
Q3 FY2017 against Q3 FY2016
| Line item | Q3 FY2017Q3 FY2016 | Change |
|---|---|---|
| Revenue | $5.41B$5.17B | +4.5% |
| Operating Expenses | $3.33B$3.21B | +3.8% |
| Operating Income | $2.07B$1.96B | +5.8% |
| Interest Expense | $180.00M$184.00M | −2.2% |
| Net Income | $1.19B$1.13B | +5.6% |
| EPS (Basic) | $1.50$1.36 | +10.3% |
| EPS (Diluted) | $1.50$1.36 | +10.3% |
| Shares Outstanding (Basic) | 794.50M829.00M | −4.2% |
| Shares Outstanding (Diluted) | 797.60M832.20M | −4.2% |
05—Questions
Frequently Asked Questions
How did Union Pacific's revenue perform in the first nine months of 2017 compared to 2016?
Union Pacific's total operating revenues increased by 7% to $15.8 billion for the nine months ended September 30, 2017, compared to $14.8 billion in the same period of 2016. This growth was primarily driven by a 7% increase in freight revenues.
What was the primary driver of the increase in freight revenues?
The increase in freight revenues was attributed to a combination of factors including core pricing gains, higher fuel surcharge revenue due to increased fuel prices, and a favorable mix of traffic. While overall volume saw a slight decline in some segments, the company's ability to increase average revenue per car (ARC) compensated for this.
How did Union Pacific manage its operating expenses?
Operating expenses increased by 6% in the third quarter and 5% year-to-date. While there were increases due to higher fuel prices, workforce reduction plans, and hurricane-related costs, the company implemented productivity initiatives. For the nine-month period, this resulted in an improved operating ratio of 63.2% compared to 64.1% in the prior year, indicating effective cost management relative to revenue growth.
What is Union Pacific's approach to shareholder returns?
Union Pacific demonstrates its commitment to shareholder returns through active share repurchases and dividend payments. During the first nine months of 2017, the company repurchased approximately 27.1 million shares of common stock under its new authorization and continued to pay dividends.
06—Continue