How Does Union Pacific’s Coal Freight Business Compare With Its Competitors?

by Trefis Team
Union Pacific Corporation
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Union Pacific Corporation’s (NYSE: UNP) coal freight revenue could decline from $2.76 billion in 2018 to $2.56 billion in 2021, according to Trefis estimates. This decline will likely be led by expected lower exports, which fueled the coal freight revenue growth in the recent years. The coal freight business accounts for roughly 12% of the company’s total revenues. In this analysis, we compare Union Pacific’s growth in coal freight vis-à-vis its primary competitors and provide an outlook of the future course of business. You can view our interactive dashboard analysis ~ How Does Union Pacific’s Coal Freight Business Compare With Its Competitors? ~ for more details. In addition, you can see more of industrial companies data here.

Analyzing The Coal Freight Revenue of Competitors (2016-2018)

  • Average Annual Growth:
    • CSX Corporation: 10.8%
    • Norfolk Southern: 10.8%

Analyzing Union Pacific’s Coal Freight Growth Since 2016 And Expected Growth Over The Next Two Years

  • Union Pacific’s coal freight revenue grew from $2.4 billion in 2016 to $2.8 billion in 2018.
  • This represents a 6% average annual growth rate.
  • This can primarily be attributed to increased coal exports, and higher pricing.
  • Looking forward, coal freight revenues will likely decline to $2.5 billion by 2020.

Estimating Union Pacific’s Coal Freight Revenues

  • Union Pacific’s coal freight revenues are the product of total coal carloads and average revenue per coal carload.
  • Total coal carloads increased from 1.16 million in 2014 to 1.24 million in 2018, but they could decline to 1.09 million in 2020.
  • Average revenue per coal carload has seen steady growth from $2093 in 2014 to around $2222 in 2018, and it could continue to grow in the near term to $2312 in 2020.

Analyzing The Factors That Impact The Growth Above

  • Coal consumption is expected to continue to decline, a trend seen over the last few years.
  • Coal production is also expected to decline in the coming years, as per EIA estimates.
  • After a sharp rise in coal exports over the last couple of years, it is expected to decline in the near term.
  • These factors will impact the coal shipments for Union Pacific over the next couple of years.

Estimating Coal Freight Revenue Contribution To Union Pacific’s Top Line

  • Union Pacific’s coal freight revenue accounted for 12.2% of the company’s total revenues in 2016.
  • It increased slightly to 12.5% in 2017, led by higher exports. However, it declined to 12.1% in 2018, due to strong gains in other segments, primarily Intermodal (reported under Premium).
  • Looking forward, the figure will likely decline to 10.4% by 2020, as the segment revenues continue to decline, while other segments, including intermodal, see steady growth.

Forecasting Union Pacific’s Market Share

  • Combined coal carloads for Union Pacific, Norfolk Southern, and CSX Corporation grew at at an average annual rate of 4.4% from 2.9 million in 2016 to 3.2 million in 2018.
  • Union Pacific’s share in total carloads declined slightly from 40.1% to 39.3% during the same period.
  • Looking forward, the pace of decline could increase, with Union Pacific’s share falling to 36.0%, as the company is facing headwinds of retirements and contract changes.


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