Low Freight Volumes Hurt Union Pacific's (UNP) Q3 Earnings
Zacks Investment Research | Oct 17, 2019 12:08AM ET
United Pacific Corporation’s (NYSE:UNP) third-quarter 2019 earnings of $2.22 per share fell short of the Zacks Consensus Estimate by 7 cents. However, the bottom line improved 3.3% on a year-over-year basis, primarily owing to lower costs.
Meanwhile, operating revenues came in at $5,516 million, missing the Zacks Consensus Estimate of $5,623.2 million. The top line also declined 7% year over year due to sluggish freight revenues (down 7%).
The year-over-year contraction in the top line was due to an 8% reduction in business volumes, measured by total revenue carloads. The underperformance on both the top- and the bottom-line front naturally disappointed investors. As a result, the stock shed value in pre-market trading.
Operating income in the third quarter dipped 2% year over year to $2.2 billion. Also, operating expenses declined 10% to $3.28 billion. Further, operating ratio (operating expenses as a percentage of revenues) improved to 59.5% from 61.7% a year ago, driven by this railroad operator’s efforts to control costs so as to offset the decline in shipments. Notably, lower the value of the metric, the better.
Moreover, this Zacks Rank #3 (Hold) company bought back 6.4 million shares worth $1.1 billion during the quarter. Effective tax rate in the period came in at 23.1% compared with 23.3% a year ago.
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