10-QPeriod: Q2 FY2021

UNION PACIFIC CORP Quarterly Report for Q2 Ended Jun 30, 2021

Filed July 22, 2021For Securities:UNP

Summary

Union Pacific Corporation reported strong financial performance for the second quarter and first half of 2021, demonstrating a significant recovery from the impacts of COVID-19 in the prior year. Total operating revenues saw a substantial increase of 30% year-over-year for the quarter and 11% for the first half, driven primarily by a rebound in freight volumes and higher average revenue per car (ARC) due to increased fuel surcharges and core pricing gains. This revenue growth translated into a substantial increase in operating income, up 50% for the quarter, and a notable improvement in the operating ratio to 55.1% from 61.0% in the prior year's second quarter. The company's effective management of operating expenses, despite headwinds from higher fuel prices and volume-related costs, contributed to profitability gains. Shareholder returns were supported by robust free cash flow generation and substantial share repurchases, indicating a positive outlook for investors.

Financial Highlights

48 data points
Beta

Revenue

$5.50B

Net Income

$1.80B

32.7% Net Margin

EPS (Diluted)

$2.72

Total Assets

$62.07B

Cash & Equivalents

$1.11B

Free Cash Flow

$1.61B

Financial Statements
Beta
Revenue$5.50B
Operating Expenses$3.03B
Operating Income$2.47B
Interest Expense$282.00M
Net Income$1.80B
EPS (Basic)$2.73
EPS (Diluted)$2.72
Shares Outstanding (Basic)658.50M
Shares Outstanding (Diluted)660.10M

Key Highlights

  • 1Total operating revenues increased significantly by 30% year-over-year to $5.504 billion for the quarter, driven by a 22% volume increase and higher average revenue per car.
  • 2Net income for the quarter rose to $1.80 billion, or $2.72 per diluted share, compared to $1.13 billion, or $1.67 per diluted share, in the prior year.
  • 3Operating income surged by 50% to $2.47 billion, reflecting strong revenue growth and improved operational efficiency.
  • 4The operating ratio improved by 5.9 percentage points to 55.1% in the second quarter of 2021, indicating enhanced profitability.
  • 5Fuel expense more than doubled due to a 71% increase in diesel fuel prices and a 22% rise in gross ton-miles.
  • 6The company repurchased approximately $2.7 billion of its common stock in the second quarter, including a $2.0 billion accelerated share repurchase program.
  • 7Cash provided by operating activities was $4.219 billion for the first six months of 2021, demonstrating strong operational cash generation.

Frequently Asked Questions

Union Pacific's revenue increased by 30% year-over-year to $5.504 billion in the second quarter of 2021. This growth was primarily fueled by a 22% increase in freight volumes and a 6% rise in average revenue per car (ARC). The higher ARC was attributable to increased fuel surcharge revenue and positive core pricing gains. The rebound in volumes reflects the economic recovery from the COVID-19 pandemic's impact in the second quarter of 2020.

Operating expenses increased by 17% year-over-year to $3.031 billion in the second quarter of 2021. Key drivers for this increase included higher fuel prices (up 71%), increased volume-related costs, higher casualty costs, and inflation. Partially offsetting these increases were productivity initiatives implemented by the company.

Union Pacific continues to return capital to shareholders. In the second quarter of 2021, the company repurchased approximately $2.7 billion of its common stock, including a significant $2.0 billion accelerated share repurchase (ASR) program. The company also paid its quarterly dividend on June 30, 2021, demonstrating a commitment to both share buybacks and dividend payouts.

The company notes ongoing supply chain disruptions, including the semiconductor chip shortage impacting the automotive industry and network congestion due to strong international intermodal demand. These disruptions can limit revenue growth by slowing asset turns and increasing costs. Additionally, the company faces challenges from higher fuel prices and inflation impacting operating expenses. The company also mentions potential impacts from weather-related challenges.