Union Pacific Corp (NYSE:UNP) stock fell 1% (As on January 26, 11:26:38 AM UTC-4, Source: Google Finance) after the company reported fourth quarter profit above estimates but said it expects some negative impact to freight volumes on lower coal demand and a muted and uncertain economy. Its current quarter volumes were down 9% year-to-date due to harsh winters across its system. Union Pacific saw a year-on-year gain in freight volumes in the quarter that ended December after a tough few months of muted freight demand and higher operating costs. In response to these headwinds, the Omaha, Nebraska-based company has continued to price its services above inflation, mirroring a trend seen across sectors such as retail and industrials. However, it does not expect higher pricing to lead to margin expansion in 2024. Union Pacific, which runs through 23 states west of Chicago and New Orleans, reported fourth-quarter operating ratio mostly flat at 60.9%.The operating ratio had risen over the last four quarters before declining this quarter in a sign of improving efficiency for the company. The improvement comes after the company tapped veteran railroad executive Jim Vena to lead operations last July amid shareholder pressure to increase operational efficiency. The company also reported improvements of 14% each in freight car velocity and locomotive productivity, for the second quarter in a row.
Moreover, Freight car velocity was 204 daily miles per car, a 7% improvement. Locomotive productivity was 129 GTMs per horsepower day, a 3% increase. Average maximum train length of 9,356 feet was flat. Workforce productivity of 1,000 car miles per employee declined 3%. Fuel consumption rate of 1.088, measured in gallons of fuel per thousand GTMs, deteriorated 1%.
UNP in the fourth quarter of FY 23 has reported the adjusted earnings per share of $2.71, beating the analysts’ estimates for the adjusted earnings per share of $2.56, according to Zacks Investment Research. The company had reported 3 percent decline in the adjusted revenue growth to $6.16 billion in the fourth quarter of FY 23, beating the analysts’ estimates for revenue of $6.11 billion. This is driven by lower fuel surcharge revenue, business mix, and volume declines partially offset by core pricing gains. Operating Income of $9.1 billion was down 8%.
Additionally, Union Pacific’s 2023 capital program totaled $3.7 billion. The company repurchased 3.5 million shares in 2023 at an aggregate cost of $712 million.