01—Abstract
Summary
Summary of the 10-Q filed July 18, 2019. Cited figures are marked; the original filing is the authoritative source.
Union Pacific Corporation (UNP) reported its second-quarter 2019 financial results, showing a slight decrease in total operating revenues to $5.6 billion compared to $5.7 billiona in the prior year period.
Net income for the quarter rose to $1.57 billionb, or $2.22 per diluted share, an increase from $1.51 billion, or $1.98 per diluted share, in the second quarter of 2018. This improvement in profitability was driven by effective cost management, including productivity savings, lower fuel prices, and a notable employment tax refund, which more than offset a 2% decline in freight revenues primarily due to a 4% decrease in volume. The company highlighted progress in its 'Unified Plan 2020' initiative, which focuses on operational efficiency and reliability, leading to improvements in locomotive, freight car, and workforce productivity despite facing challenges from widespread flooding.
Financially, UNP demonstrated a strong operating ratio of 59.6%c, an all-time quarterly record, indicating robust cost control. The company also continued its commitment to shareholder returns through share repurchases and dividend payments.
Investments in capital expenditures were approximately $1.56 billiond for the first six months of the year, primarily focused on infrastructure replacements and capacity expansion. The company reaffirmed its expectation for full-year 2019 capital expenditures to be around $3.2 billion.
02—Key points
Key Highlights
- Total operating revenues for Q2 2019 decreased slightly to $5.6 billion from $5.7 billion in Q2 2018.
- Net income increased to $1.57 billion ($2.22/share) in Q2 2019 from $1.51 billion ($1.98/share) in Q2 2018.
- Freight revenues declined by 2% driven by a 4% volume decrease, partially offset by a 3% increase in average revenue per car (ARC).
- Operating expenses decreased by 7% in Q2 2019 due to productivity savings, lower fuel prices, and an employment tax refund, leading to an improved operating ratio of 59.6% (an all-time quarterly record).
- Significant progress was made on the 'Unified Plan 2020' initiative, showing improvements in locomotive, freight car, and workforce productivity.
- Capital expenditures for the first six months of 2019 were $1.56 billion, with full-year 2019 capital expenditure guidance of approximately $3.2 billion.
- The company repurchased $3.6 billion in shares in the first half of 2019, and a new authorization for up to 150 million shares was approved.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2019filed July 18, 2019Financial Statements
Q2 FY2019 against Q2 FY2018
| Line item | Q2 FY2019Q2 FY2018 | Change |
|---|---|---|
| Revenue | $5.60B$5.67B | −1.3% |
| Operating Expenses | $3.34B$3.57B | −6.6% |
| Operating Income | $2.26B$2.10B | +7.7% |
| Interest Expense | $259.00M$203.00M | +27.6% |
| Net Income | $1.57B$1.51B | +4.0% |
| EPS (Basic) | $2.23$1.98 | +12.6% |
| EPS (Diluted) | $2.22$1.98 | +12.1% |
| Shares Outstanding (Basic) | 705.50M760.50M | −7.2% |
| Shares Outstanding (Diluted) | 708.00M763.70M | −7.3% |
05—Questions
Frequently Asked Questions
What were the primary drivers of the revenue decline in the second quarter?
The primary driver of the revenue decline was a 4% decrease in volume across various commodity groups, including coal, domestic intermodal, frac sand, grain, and auto parts. This volume decrease was partially offset by a 3% increase in average revenue per car (ARC), attributed to core pricing gains.
How did the company manage expenses to achieve an improved operating ratio despite lower revenues?
Union Pacific achieved an improved operating ratio of 59.6% through a combination of factors. These included significant productivity savings from initiatives like 'Unified Plan 2020', lower fuel prices, and a one-time $32 million reduction in compensation and benefits expense from employment tax refund claims. These cost reductions more than offset the impact of lower top-line results and weather-related challenges.
What is the company's outlook for capital expenditures in 2019?
Union Pacific expects its total capital expenditures for 2019 to be approximately $3.2 billion. This figure may be subject to revisions based on the impact of the 'Unified Plan 2020' initiative and prevailing business conditions or regulatory environments.
How is the company returning capital to shareholders?
The company is returning capital to shareholders through both share repurchases and dividend payments. In the first six months of 2019, approximately $3.6 billion was spent on share repurchases. A new authorization for up to 150 million shares was approved in April 2019, replacing the previous program. Dividends paid also increased compared to the prior year.
06—Continue