01—Abstract
Summary
Summary of the 10-Q filed April 18, 2019. Cited figures are marked; the original filing is the authoritative source.
Union Pacific Corporation reported a decrease in operating revenues to $5.38 billiona for the first quarter of 2019, down from $5.48 billion in the same period of 2018.
This decline was primarily driven by a 2% decrease in freight volumes, despite steady average revenue per car due to core pricing gains and higher fuel surcharge revenue. While revenues were impacted by significant weather disruptions in the Midwest and Pacific Northwest, which also led to increased operating expenses, the company managed to achieve a slight increase in operating income of 1% to $1.96 billionb. This was aided by productivity savings, lower fuel prices, and a notable one-time reduction in compensation expenses due to a railroad retirement tax refund.
Net income increased by 6% to $1.39 billionc, resulting in diluted earnings per share of $1.93, up from $1.68 in the prior year's quarter. The company also saw an improvement in its operating ratio to 63.6%, a 1.0 percentage point decrease year-over-year, reflecting better operational efficiency.
Union Pacific continued its capital return program, repurchasing $2.99 billiond in common stock during the quarter, and announced a new authorization for up to 150 million shares. The company forecasts approximately $3.2 billion in capital expenditures for 2019.
02—Key points
Key Highlights
- Operating revenues decreased by 2% to $5.38 billion, driven by a 2% decline in freight volumes, partly due to severe weather events impacting operations.
- Net income increased by 6% to $1.39 billion, resulting in diluted EPS of $1.93, up from $1.68 in Q1 2018.
- Operating income grew 1% to $1.96 billion, benefiting from productivity initiatives, lower fuel prices, and a one-time employment tax refund that reduced compensation expenses.
- The operating ratio improved by 1.0 percentage point to 63.6%, indicating enhanced operational efficiency.
- Capital expenditures for the first quarter were $752 million, with full-year 2019 capital expenditures projected at approximately $3.2 billion.
- The company significantly increased its share repurchase activity, spending $2.99 billion in Q1 2019 and announcing a new authorization to repurchase up to 150 million shares.
- Adoption of new lease accounting standards (ASC 842) resulted in approximately $2 billion increase in assets and liabilities, but no impact on the consolidated results of operations or cash flows.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2019filed April 18, 2019Financial Statements
Q1 FY2019 against Q1 FY2018
| Line item | Q1 FY2019Q1 FY2018 | Change |
|---|---|---|
| Revenue | $5.38B$5.47B | −1.7% |
| Operating Expenses | $3.42B$3.54B | −3.2% |
| Operating Income | $1.96B$1.94B | +1.1% |
| Interest Expense | $247.00M$186.00M | +32.8% |
| Net Income | $1.39B$1.31B | +6.2% |
| EPS (Basic) | $1.94$1.69 | +14.8% |
| EPS (Diluted) | $1.93$1.68 | +14.9% |
| Shares Outstanding (Basic) | 716.80M776.40M | −7.7% |
| Shares Outstanding (Diluted) | 719.50M779.60M | −7.7% |
05—Questions
Frequently Asked Questions
How did severe weather impact Union Pacific's first-quarter performance?
Severe weather, including heavy snowfall and flooding in the Midwest and Pacific Northwest, negatively impacted carload volumes across various business lines and drove additional operating expenses, adversely affecting earnings by approximately $0.15 per diluted share. These disruptions also impacted average train speed, which declined 6% year-over-year.
What is the significance of the employment tax refund on the company's results?
Union Pacific received a $42 million refund for railroad retirement taxes related to certain stock awards and bonus payments. This one-time event reduced compensation and benefit expenses, contributing to the increase in operating income and the improvement in the operating ratio.
How is Union Pacific managing its capital allocation, particularly regarding shareholder returns?
Union Pacific demonstrated a strong commitment to shareholder returns by repurchasing $2.99 billion of its common stock in the first quarter of 2019. Furthermore, the company's Board of Directors approved a new share repurchase authorization for up to 150 million shares, signaling continued confidence and a strategy to return capital to shareholders.
What is the company's outlook on capital expenditures for 2019?
Union Pacific expects its total capital expenditures for 2019 to be approximately $3.2 billion. This investment plan may be subject to revision based on the ongoing evaluation of its Unified Plan 2020, business conditions, and the regulatory environment.
06—Continue