Union Pacific Q4 Earnings Miss Estimates Hit By Winter Weather & Network Congestion

• Union Pacific CorpUNP reportedfourth-quarter FY22 sales growth of 8%year-on-year to $6.18 billion, missing the consensus of $6.31 billion.
• Higher fuel surcharge revenue, core pricing gains, and volume growth drove the revenue growth.
• Freight Revenues increased by 9% Y/Y to $5.76 billion, with Automotive +27%, Energy & specialized markets +12%, and Premium +15%.
• As measured by total revenue carloads, business volumes were up 1%.
• EPS of $2.67 missed the consensus of $2.78.
• Operating expenses increased by 14% Y/Y to $3.8 billion, and the operating ratio was 61%, a contraction of 360 basis points.
• Operating income decreased by 1% Y/Y to $2.4 billion, and the margin contracted by 350 bps to 39%.
• Q4 freight car velocity of 191 daily miles per car, a 3% decline; locomotive productivity was 123 gross ton-miles (GTMs) per horsepower day, a 5% decline. Fuel consumption rate, measured in gallons of fuel per thousand GTMs, improved 2%.
• Union Pacific held over $1 billion in cash and equivalents as of Dec. 31, 2022. It generated cash from operating activities for FY22 of $9.36 billion, compared to $9 billion a year ago. Free cash flow was $2.73 billion.
• The company repurchased 3.5 million shares in the quarter at an aggregate cost of $0.7 billion.
• "In the fourth quarter, we grew carloads as we continued to face challenges hiring craft professionals in critical locations and experienced the impact of extreme winter weather on our network in December," said chairman and CEO Lance Fritz.
• FY23 Guidance:UNP expects carloads to exceed industrial production (current industrial production forecast -0.5%).
• The company expects capital spending to be less than 15% of revenue and sees improvement in the operating ratio.
• Price Action:UNP shares traded lower by 0.96% at $208.12 in premarket on the last check Tuesday.

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