Union Pacific’s Q2 2017 Earnings Preview: Top Line Growth And Productivity Improvement Initiatives To Boost Earnings

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Union Pacific

Union Pacific will release its Q2 2017 earnings results and conduct a conference call with analysts on July 20. [1] We expect Union Pacific to report strong earnings growth driven by robust top line growth and the impact of the company’s productivity improvement initiatives.

Union Pacific registered 5% year-over-year growth in shipments in Q2, driven by the shipments of coal and construction-related commodities. [2] High natural gas prices and favorable policy support for the coal industry from the federal government have translated into a revival in coal production and the demand for coal from utilities. This has sharply boosted rail shipments of the commodity. In addition, increased construction activity, particularly of the non-residential variety, has translated into higher rail shipments of commodities such as crushed stone, sand, and gravel. Besides higher shipment volumes, higher oil prices are expected to boost the company’s fuel surcharge revenue, thereby contributing to overall revenue growth.

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In addition to strong top line growth, Union Pacific expects to realize savings of $350-400 million from its productivity improvement initiatives in 2017. [3] Savings from workforce rationalization, close matching of train length to demand, and the lowering of service and repair costs added up to $90 million in Q1. [3] We expect the company to realize similar levels of productivity-related savings in Q2. Thus, a combination of top line growth and productivity savings should translate into strong earnings growth for Union Pacific.

Have more questions about Union Pacific? See the links below.

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Union Pacific

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Notes:
  1. Union Pacific Corporation Invites You to Join Its 2nd Quarter 2017 Earnings Release Broadcast, Union Pacific News Release []
  2. Weekly Carloadings Report For Week 26 2017, Union Pacific Website []
  3. Union Pacific’s Q1 2017 Earnings Call Transcript, Seeking Alpha [] []