10-QPeriod: Q1 FY2023

UNION PACIFIC CORP Quarterly Report for Q1 Ended Mar 31, 2023

Filed April 20, 2023For Securities:UNP

Summary

Union Pacific Corporation (UNP) reported solid results for the first quarter of 2023, with net income of $1.63 billion, or $2.67 per diluted share, matching the previous year's first quarter. Operating revenues saw a 3% increase to $6.06 billion, primarily driven by a 4% rise in freight revenues. This growth was fueled by higher average revenue per car (ARC), attributed to increased fuel surcharges and core pricing gains, which more than offset a 1% decline in freight volumes. Despite revenue growth, operating expenses rose 8% to $3.76 billion, leading to a 3% decrease in operating income to $2.29 billion and a deterioration of the operating ratio to 62.1% from 59.4% in the prior year. This increase in expenses was driven by factors such as weather disruptions, inflation, higher fuel prices, and an increased workforce. The company maintains a strong financial position, with $1.1 billion in cash and cash equivalents and $2.0 billion in available credit.

Financial Highlights

48 data points
Beta

Revenue

$6.06B

Net Income

$1.63B

26.9% Net Margin

EPS (Diluted)

$2.67

Total Assets

$65.97B

Cash & Equivalents

$1.08B

Free Cash Flow

$1.07B

Financial Statements
Beta
Revenue$6.06B
Operating Expenses$3.76B
Operating Income$2.29B
Interest Expense$336.00M
Net Income$1.63B
EPS (Basic)$2.67
EPS (Diluted)$2.67
Shares Outstanding (Basic)610.60M
Shares Outstanding (Diluted)611.50M

Key Highlights

  • 1Net income remained stable at $1.63 billion ($2.67 per diluted share) compared to the first quarter of 2022.
  • 2Total operating revenues increased by 3% to $6.06 billion, with freight revenues up 4% due to higher average revenue per car (ARC).
  • 3Operating expenses increased by 8% to $3.76 billion, driven by weather, inflation, fuel costs, and workforce expansion.
  • 4The operating ratio (a measure of efficiency) worsened to 62.1% from 59.4% year-over-year due to the rise in operating expenses.
  • 5Cash provided by operating activities decreased to $1.84 billion from $2.24 billion, partly due to labor agreement settlements.
  • 6Capital investments for the full year 2023 are projected at $3.6 billion, focusing on infrastructure hardening, growth projects, and fleet modernization.
  • 7The company repurchased $591 million of its common stock during the quarter, demonstrating a commitment to returning capital to shareholders.

Frequently Asked Questions

Operating expenses increased by 8% primarily due to operational challenges including additional costs related to weather, inflation, higher fuel prices, and an increase in workforce levels, partially offset by lower volume-related costs.

Freight volumes experienced a slight decline of 1% compared to the first quarter of 2022. This was driven by a weaker market for domestic intermodal and forest products, along with service and weather interruptions affecting coal shipments. These were partially offset by increased automotive production, strength in rock shipments, and a domestic intermodal contract win.

Union Pacific anticipates capital expenditures of approximately $3.6 billion for the full year 2023. These investments are intended to support their growth strategy by hardening infrastructure, replacing aging assets, improving network safety and resilience, and investing in growth-related projects and fleet modernization.

Cash provided by operating activities was $1.84 billion, a decrease from the prior year, partly due to settlements for labor union agreements. The company used cash for investing activities ($805 million) primarily for capital investments and for financing activities ($927 million), which included share repurchases and debt repayment. Free cash flow was $240 million.