10-QPeriod: Q3 FY2021

UNION PACIFIC CORP Quarterly Report for Q3 Ended Sep 30, 2021

Filed October 21, 2021For Securities:UNP

Summary

Union Pacific Corporation (UNP) reported strong financial results for the nine months ended September 30, 2021, with net income increasing to $4.81 billion from $3.97 billion in the prior year period. This growth was driven by a 12% increase in total operating revenues to $16.07 billion, primarily fueled by a 11% rise in freight revenues. The company experienced a notable increase in Average Revenue per Car (ARC), up 4% year-over-year, reflecting higher fuel surcharge revenue, core pricing gains, and a favorable traffic mix, despite a slight overall decline in total revenue carloads. Operating expenses also rose, primarily due to higher fuel costs (up 48% year-to-date) and increased compensation and benefits, but the strong revenue growth outpaced expense increases, leading to an improved operating ratio of 57.1% for the nine-month period, a 2.4-point improvement from the prior year. Cash flow from operations remained robust, increasing to $6.50 billion for the nine months ended September 30, 2021, which supported significant share repurchases totaling $5.93 billion year-to-date. The company maintained a strong liquidity position with $1.2 billion in cash and cash equivalents and $2.0 billion in available credit. Management anticipates continued capital expenditures of approximately $2.9 billion for 2021, focused on infrastructure hardening, asset replacement, and efficiency improvements, supporting long-term growth and operational resilience.

Financial Highlights

48 data points
Beta

Revenue

$5.57B

Net Income

$1.67B

30.1% Net Margin

EPS (Diluted)

$2.57

Total Assets

$62.36B

Cash & Equivalents

$1.19B

Free Cash Flow

$1.53B

Financial Statements
Beta
Revenue$5.57B
Operating Expenses$3.13B
Operating Income$2.43B
Interest Expense$290.00M
Net Income$1.67B
EPS (Basic)$2.58
EPS (Diluted)$2.57
Shares Outstanding (Basic)648.70M
Shares Outstanding (Diluted)650.30M

Key Highlights

  • 1Net income for the first nine months of 2021 increased to $4.81 billion, up from $3.97 billion in the same period of 2020.
  • 2Total operating revenues grew by 12% year-over-year to $16.07 billion for the first nine months of 2021.
  • 3Average Revenue per Car (ARC) increased by 4% for the first nine months, driven by fuel surcharges, pricing, and traffic mix, even as total carloads saw a modest increase of 6%.
  • 4Operating expenses increased by 7% year-over-year to $9.17 billion, significantly impacted by a 48% rise in fuel costs.
  • 5The operating ratio improved to 57.1% for the nine-month period, down from 59.5% in the prior year, indicating enhanced operational efficiency.
  • 6Cash provided by operating activities increased to $6.50 billion for the nine months ended September 30, 2021.
  • 7Share repurchases were substantial, totaling $5.93 billion year-to-date, demonstrating a strong commitment to returning capital to shareholders.

Frequently Asked Questions

Union Pacific's revenue growth was primarily driven by an 11% increase in freight revenues, which benefited from higher average revenue per car (ARC). This increase in ARC was due to higher fuel surcharge revenue, core pricing gains, and a more favorable mix of traffic. Although total revenue carloads increased by 6%, the strength in pricing and surcharges was more impactful.

The primary factor driving the 7% increase in operating expenses for the first nine months of 2021 was a significant rise in fuel costs, which were up 48% compared to the same period in 2020. Other contributing factors included increased compensation and benefits, higher casualty costs, and general inflation, although productivity initiatives and lower severance costs provided some offset.

Union Pacific demonstrated a strong commitment to returning capital to shareholders, with year-to-date share repurchases totaling $5.93 billion. The company also plans capital expenditures of approximately $2.9 billion for 2021, focused on infrastructure hardening, asset replacement, and improving operational efficiency to support long-term growth and resilience. The company's robust operating cash flow generation supports these capital allocation priorities.

While the company reported improvements in its operating ratio and strong revenue growth, it also noted network challenges in Q3 2021 due to California wildfires and global supply chain disruptions, which impacted metrics like freight car velocity and car trip plan compliance. Management is focused on improving these areas through ongoing operational plan implementation, infrastructure hardening, and efficiency initiatives to ensure network fluidity and reliable service.