Union Pacific’s Q2 2016 Earnings Review: Top Line Headwinds Take Their Toll On Results
Union Pacific’s Q2 2016 earnings per share declined 15% year-over-year as a result of a decline in revenue due to lower shipments and fuel surcharge revenue. The decline in coal shipments was particularly severe due to a fall in demand for the commodity from utilities, with soft natural gas prices favoring increasing usage of natural gas for electricity generation. Lower fuel surcharge revenue as a result of a decline in oil prices also contributed to the decline in the company’s top line. Though lower volume related operating expenses as well as Union Pacific’s cost reduction initiatives partially offset the impact of top line headwinds on the operating ratio (operating expenses as a percent of revenue), the net impact was a 110 basis points deterioration in this metric of operational performance.
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