Friday, July 23, 2010

Union Pacific Posts Record Profit (BUY)

U.S. railroad giant Union Pacific Corp. (UNP: 72.40 0.00 0.00%) reported excellent results for the second quarter 2010. Quarterly net income was a record high $711 million or $1.40 per share compared to a net income of $465 million or 92 cents per share in the year-ago quarter. Second quarter 2010 EPS of $1.40 was far ahead of the Zacks Consensus Estimate of $1.21.
This blockbuster performance was achieved through best-ever operating ratio, massive growth in business volume, cost efficiency, and pricing gains. Second quarter 2010 operating ratio was at historic high-level of 69.4% compared to 77.4% in the prior-year quarter. This is the first time that Union Pacific achieved a sub-70 benchmark.
Quarterly Consumer Satisfaction Index was 89% compared to 87% in the year-ago quarter. Quarterly business volume (measured by total revenue carloads) was 2.18 million, up 18% year-over-year. For the first time in six years, all the six business groups of Union Pacific posted volume growth in the same quarter.
Total operating revenue, in the second quarter 2010 was $4,182 million, up 27% year-over-year. This was also better than the Zacks Consensus Estimate of $4,097 million. Within this, total Freight revenue was $3,956 million, up 27% year-over-year. Quarterly Freight revenue of all the six business groups increased in the same quarter.
Operating expenses in the second quarter 2010 were $2,903 million, up 14% year-over-year. Quarterly operating income was $1,279 million, up 71% year-over-year. In the reported quarter, average revenue per car was $1,815, up 8% year-over-year.


During the first nine months of 2010, Union Pacific generated $1,695 million of cash from operations compare to $1,508 million in the year-ago period. Free cash flow during the same time period was $755 million, compared to just $281 million in the year-ago period.
At the end of the second quarter 2010, Union Pacific had $3,702 million of cash and marketable securities on its balance sheet compared to $2,886 million at the end of fiscal 2009. Total debt, at the end of the second quarter 2010 was $9,365 million compared to $9,848 million at the end of fiscal 2009. Debt-to-capitalization ratio at the end of the second quarter 2010 was 0.35 compared to 0.37 at the end of fiscal 2009.
Segment Wise Revenue
Quarterly total Freight revenue was $3,956 million, up 27% year-over-year. Within this segment, Agricultural revenue was $698 million, up 13% year-over-year. Automotive revenue was $334 million, up 105% year-over-year. Chemicals revenue was $592 million, up 19% year-over-year. Energy revenue was $836 million, up 17% year-over-year. Industrial Products revenue was $692 million, up 30% year-over-year. Intermodal revenue was $804 million, up 35% year-over-year. Quarterly Other revenue was $226 million, up 24% year-over-year.

Overall Summary: 45%, Bullish
 55%, Bearish
    Trade Quality: Upside  30%, Poor
Downside  70%, Good


 Analysts' Targets
 Longbow$91 
    Neutral
    Monday, June 21, 2010
 Brean Murray & Co.$88 
    Outperform
    Friday, April 23, 2010
 Stifel Nicolaus$95 
    Buy
    Friday, April 23, 2010
 RBC Capital Markets$74 
    Sector Perform
    Friday, January 22, 2010

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