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Union Pacific Reports Fourth Quarter and Full Year 2018 Results
Omaha, Neb., January 24, 2019
Union Pacific Corporation (NYSE: UNP) today reported record 2018 fourth quarter net income of $1.6 billion, or $2.12 per diluted share, which represents 29 and 39 percent increases, respectively, when compared to adjusted results for the fourth quarter 2017. Reported fourth quarter 2017 results include previously disclosed adjustments reflecting the impact of corporate tax reform. Including those items, 2017 fourth quarter reported net income was $7.3 billion, or $9.25 per diluted share.
Financial Performance*
| Millions, Except Per Share Amounts and Percentages For the Three Months Ended | Operating Income | Income Taxes | Net Income | Diluted EPS | Operating Ratio |
|---|---|---|---|---|---|
| 2017 Reported Results (GAAP) (Includes restatement for ASU 2017-07) | $2,247 | ($5,186) | $7,278 | $9.25 | 58.8% |
| Factors Affecting Comparability: | |||||
| Adjustments for 2017 Tax Cuts and Jobs Act | |||||
| Equity-method affiliates | (212) | (73) | (139) | (0.18) | 3.9 pts |
| Deferred taxes | --- | 5,935 | (5,935) | (7.54) | --- |
| 2017 Adjusted Results (non-GAAP) | $2,035 | $676 | $1,204 | $1.53 | 62.7% |
| 2018 Reported Results (GAAP) | $2,210 | $462 | $1,554 | $2.12 | 61.6% |
| Change vs. 2017 Adjusted Results | 9% | (32)% | 29% | 39% | (1.1) pts |
"We reported record earnings for the quarter driven by strong volume growth, core pricing gains, and regaining positive productivity momentum," said Lance Fritz, Union Pacific chairman, president and chief executive officer. "Building on this progress, we are advancing the implementation schedule for Unified Plan 2020. Since starting this initiative in October, we have improved on-time service for our customers while at the same time eliminating excess costs and improving the utilization of network resources."
Fourth Quarter Summary
Operating revenue of $5.8 billion was up 6 percent in the fourth quarter 2018 compared to the fourth quarter 2017. Fourth quarter business volumes, as measured by total revenue carloads, increased 3 percent compared to 2017. Strong growth in industrial and premium shipments more than offset declines in agricultural products and energy. In addition:
- Quarterly freight revenue increased 6 percent compared to the fourth quarter 2017, as positive volume, increased fuel surcharge revenue and core pricing gains all contributed to the increase, but were partially offset by negative business mix.
- Union Pacific’s operating ratio of 61.6 percent improved 1.1 points compared to adjusted fourth quarter 2017.
- The $2.33 per gallon average quarterly diesel fuel price in the fourth quarter 2018 was 15 percent higher than the fourth quarter 2017.
- Quarterly train speed, as reported to the Association of American Railroads, was 24.4 mph, 3 percent slower than the fourth quarter 2017.
- Terminal dwell was 26.7 hours, an 18 percent improvement compared to the fourth quarter 2017.
- Union Pacific repurchased 8 million shares in the fourth quarter 2018 at an aggregate cost of $1.2 billion. Union Pacific also received 4.5 million shares to complete a $3.6 billion Accelerated Share Repurchase program initiated in June 2018.
Summary of Fourth Quarter Freight Revenues
- Energy down 8 percent
- Agricultural Products up 5 percent
- Industrial up 10 percent
- Premium up 15 percent
2018 Full Year Summary
For the full year 2018, Union Pacific reported record net income of $6 billion or $7.91 per diluted share, which represents 29 and 37 percent increases, respectively, when compared to adjusted results for 2017. Reported 2017 results include previously disclosed adjustments reflecting the impact of corporate tax reform. Including those items, 2017 reported net income was $10.7 billion, or $13.36 per diluted share.
Financial Performance*
| Millions, Except Per Share Amounts and Percentages For the Year Ended | Operating Income | Income Taxes | Net Income | Diluted EPS | Operating Ratio |
|---|---|---|---|---|---|
| 2017 Reported Results (GAAP) (Includes restatement for ASU 2017-07) | $8,106 | ($3,080) | $10,712 | $13.36 | 61.8% |
| Factors Affecting Comparability: | |||||
| Adjustments for 2017 Tax Cuts and Jobs Act | |||||
| Equity-method affiliates | (212) | (73) | (139) | (0.17) | 1.0 pts |
| Deferred taxes | --- | 5,935 | (5,935) | (7.40) | --- |
| 2017 Adjusted Results (non-GAAP) | $7,894 | $2,782 | $4,638 | $5.79 | 62.8% |
| 2018 Reported Results (GAAP) | $8,517 | $1,775 | $5,966 | $7.91 | 62.7% |
| Change vs. 2017 Adjusted Results | 8% | (36)% | 29% | 37% | (0.1) pts |
Operating revenue totaled $22.8 billion compared to $21.2 billion in 2017. Operating income totaled $8.5 billion, an 8 percent increase compared to adjusted 2017. In addition:
- Freight revenue totaled $21.4 billion, an 8 percent increase compared to 2017. Carloadings were up 4 percent versus 2017, led by strong growth in industrial and premium shipments.
- Average diesel fuel prices increased 27 percent to $2.29 per gallon in 2018 from $1.81 per gallon in 2017.
- Union Pacific’s operating ratio improved to 62.7 percent, 0.1 points lower than adjusted 2017.
- Train speed, as reported to the Association of American Railroads, was 24.5 mph, 4 percent slower than full year 2017.
- Terminal dwell was 29.6 hours, a 2 percent improvement compared to full year 2017.
- Union Pacific’s reportable personal injury rate of 0.82 incidents per 200,000 employee hours increased 4 percent compared to the full year 2017.
- Union Pacific’s capital program in 2018 totaled $3.2 billion.
- Union Pacific repurchased 57.2 million shares in 2018 at an aggregate cost of $8.2 billion, which includes 24.3 million shares associated with a $3.6 billion Accelerated Share Repurchase program initiated in June 2018 and completed in the fourth quarter.
2019 Outlook
"We are optimistic that continued economic growth, improving service performance and the strength of our diverse franchise will drive positive volume and revenue growth in 2019. We expect operating margins will increase as a result of solid core pricing gains and significant productivity benefits from our G55 + 0 initiatives, including Unified Plan 2020," said Fritz. "We have a strong leadership team in place that includes new people in key positions who will help deliver on our goals for achieving industry-leading safety, service reliability, and financial performance in the coming year."
Fourth Quarter 2018 Earnings Conference Call
Union Pacific will host its fourth quarter 2018 earnings release presentation live over the Internet and via teleconference on Thursday, January 24, 2019 at 8:45 a.m. Eastern Time. The presentation will be webcast live over the internet on Union Pacific’s website at www.up.com/investor. Alternatively, the webcast can be accessed directly through the following link. Participants may join the conference call by dialing 877/407-8293 (or for international participants, 201/689-8349).
About Union Pacific
Union Pacific Railroad is the principal operating company of Union Pacific Corporation (NYSE: UNP). One of America's most recognized companies, Union Pacific Railroad connects 23 states in the western two-thirds of the country by rail, providing a critical link in the global supply chain. The railroad's diversified business mix is classified into its Agricultural Products, Energy, Industrial and Premium business groups. Union Pacific serves many of the fastest-growing U.S. population centers, operates from all major West Coast and Gulf Coast ports to eastern gateways, connects with Canada's rail systems and is the only railroad serving all six major Mexico gateways. Union Pacific provides value to its roughly 10,000 customers by delivering products in a safe, reliable, fuel-efficient and environmentally responsible manner.
Union Pacific Investor contact: Mike Miller at 402-544-4227 or mvmiller@up.com
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This presentation and related materials contain statements about the Company’s future that are not statements of historical fact, including specifically the statements regarding the Company’s expectations with respect to economic conditions; its ability to generate financial returns; improve resource productivity; enhancing the customer experience; implementing corporate strategies; and providing excellent service to its customers and returns to its shareholders. These statements are, or will be, forward-looking statements as defined by the Securities Act of 1933 and the Securities Exchange Act of 1934. Forward-looking statements also generally include, without limitation, information or statements regarding: projections, predictions, expectations, estimates or forecasts as to the Company’s and its subsidiaries’ business, financial, and operational results, and future economic performance; and management’s beliefs, expectations, goals, and objectives and other similar expressions concerning matters that are not historical facts.
Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times that, or by which, such performance or results will be achieved. Forward-looking information, including expectations regarding operational and financial improvements and the Company’s future performance or results are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the statement. Important factors, including risk factors, could affect the Company’s and its subsidiaries’ future results and could cause those results or other outcomes to differ materially from those expressed or implied in the forward-looking statements. Information regarding risk factors and other cautionary information are available in the Company’s Annual Report on Form 10-K for 2017, which was filed with the SEC on February 9, 2018. The Company updates information regarding risk factors if circumstances require such updates in its periodic reports on Form 10-Q and its subsequent Annual Reports on Form 10-K (or such other reports that may be filed with the SEC).
Forward-looking statements speak only as of, and are based only upon information available on, the date the statements were made. The Company assumes no obligation to update forward-looking information to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information. If the Company does update one or more forward-looking statements, no inference should be drawn that the Company will make additional updates with respect thereto or with respect to other forward-looking statements. References to our website are provided for convenience and, therefore, information on or available through the website is not, and should not be deemed to be, incorporated by reference herein.
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Media Contact
Raquel Espinoza
402-544-5034
respinoza@up.com
@RaquelEspinoza