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Union Pacific Corp UNP

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Union Pacific’s Q3 Carloads Flat on Auto and Intermodal Headwinds, but Demand Otherwise Solid

Matthew Young, CFA Equity Analyst

Analyst Note

| Matthew Young, CFA |

Wide moat Class-I railroad UNP’s third-quarter revenue grew 13% year over year (it was up 29% in the second quarter) on yield improvement and higher fuel surcharges—revenue came in slightly ahead of our forecast. Carload volume was roughly flat, which compares with the 22% increase posted in the second quarter that benefited from an easy pandemic comparison. Industrial sector demand remains positive, along with strong retail end market demand for intermodal, but auto carloads are still anemic due to the semiconductor shortage. Domestic and international intermodal grappled with network congestion, and grain fell on lower U.S. stocks. Average revenue per carload was up 12.5% on solid rate gains and favorable mix (lower intermodal, with higher industrial shipments). Core pricing continues to benefit from yield management and constrained capacity across most transportation modes. Management now expects full-year carload growth near 5% (7% previously). This is below our forecast, but largely offset by higher-than-expected yield gains.

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Company Profile

Business Description

Omaha, Nebraska-based Union Pacific is the largest public railroad in North America. Operating on more than 30,000 miles of track in the western two thirds of the U.S., UP generated roughly $20 billion of revenue in 2020 by hauling coal, industrial products, intermodal containers, agriculture goods, chemicals, and automotive goods. UP owns about one fourth of Mexican railroad Ferromex and derives about 10% of its revenue hauling freight to and from Mexico.

1400 Douglas Street
Omaha, NE, 68179
T +1 402 544-5000
Sector Industrials
Industry Railroads
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Cyclical
Employees 29,877