(Source: Union Pacific press release, January 24, 2023)
OMAHA, Neb. — Union Pacific Corporation today reported 2022 fourth quarter net income of $1.6 billion, or $2.67 per diluted share. This compares to 2021 fourth quarter net income of $1.7 billion, or $2.66 per diluted share.
Fourth Quarter Results
- Fourth quarter earnings per diluted share of $2.67
- Fourth quarter operating revenue up 8%
Full Year 2022 Results
- Full year earnings per diluted share of $11.21
- Full year operating income up 6%
Reported net income for full year 2022 was $7.0 billion, or $11.21 per diluted share. These full year results compare to full year 2021 net income of $6.5 billion, or $9.95 per diluted share.
“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 Lance Fritz, Union Pacific chairman, president, and chief executive officer. “As a result, revenue growth was more than offset by elevated operating expenses from operational inefficiencies and a higher inflationary environment. For the full year, we made good progress on employee safety, and we took another step toward our sustainability goals as our fuel consumption rate improved for the fourth consecutive year. Looking to 2023, we expect continued improvements in network fluidity to support business development, generating volume growth that exceeds industrial production. We also expect network improvements to help us recapture lost productivity while providing customers with reliable service.”
Fourth Quarter Summary
Financial Results: Revenue Growth Offset by Higher Expenses Associated with Inflation and Network Recovery; Fourth Quarter Record for Operating Revenue
Fourth Quarter 2022 Compared to Fourth Quarter 2021
- Operating revenue of $6.2 billion was up 8% driven by higher fuel surcharge revenue, core pricing gains, and volume growth, partially offset by a negative business mix.
- Business volumes, as measured by total revenue carloads, were up 1%.
- Union Pacific’s 61.0% operating ratio deteriorated 360 basis points. Falling fuel prices late in the quarter positively impacted the operating ratio by 20 basis points.
- Operating income of $2.4 billion declined 1%.
- The company repurchased 3.5 million shares in fourth quarter 2022 at an aggregate cost of $0.7 billion.
Operating Performance: Service and Efficiency Measures Impacted by Network Congestion and Winter Weather; Fourth Quarter Record for Fuel Consumption Rate
Fourth Quarter 2022 Compared to Fourth Quarter 2021
- Quarterly freight car velocity was 191 daily miles per car, a 3% decline.
- Quarterly locomotive productivity was 123 gross ton-miles (GTMs) per horsepower day, a 5% decline.
- Average maximum train length decreased 1% to 9,191 feet.
- Quarterly workforce productivity decreased 3% to 1,010 car miles per employee.
- Fuel consumption rate of 1.064, measured in gallons of fuel per thousand GTMs, improved 2%.
2022 Full Year Summary
Financial Results: Fuel Surcharge, Core Pricing Gains, and Volume Drive Revenue Growth; Records for Operating Revenue, Operating Income, Net Income, and Earnings Per Share
Full Year 2022 Compared to Full Year 2021
- Operating revenue of $24.9 billion was up 14% driven by higher fuel surcharge revenue, core pricing gains, and volume growth.
- Business volumes, as measured by total revenue carloads, grew 2%.
- Union Pacific’s 60.1% reported operating ratio deteriorated 290 basis points. Higher fuel prices negatively impacted the operating ratio by 20 basis points and the prior period adjustment related to new labor agreements added 30 basis points to operating ratio.
- Operating Income of $9.9 billion was up 6%.
- Union Pacific’s 2022 capital program totaled $3.4 billion.
- The company repurchased 27.1 million shares in 2022 at an aggregate cost of $6.3 billion.
Operating Performance: Network Operations Impacted by Crew Availability and Operational Inefficiencies; Record for Fuel Consumption Rate
Full Year 2022 Compared to Full Year 2021
- Union Pacific’s reportable personal injury rate improved 18% to 0.80 per 200,000 employee-hours compared to 0.98 for full year 2021.
- Freight car velocity was 191 daily miles per car, a 6% decline.
- Locomotive productivity was 125 GTMs per horsepower day, a 6% decline.
- Average maximum train length of 9,329 feet was flat.
- Workforce productivity of 1,036 car miles per employee was flat.
- Fuel consumption rate of 1.078, measured in gallons of fuel per thousand GTMs, improved 1%.
2023 Guidance
- Full year carloads to exceed Industrial Production
- Current Industrial Production forecast: -0.5%
- Full year operating ratio improvement
- Pricing dollars in excess of inflation dollars
- Capital Allocation:
- Capital spending less than 15% of revenue
- Capital plan of $3.6 billion
- Long term dividend payout target of ~45% of earnings
- Excess cash to share repurchases