Union Pacific Corporation (UNP): Drop in Volumes Continue

Posted on Jul 24 2015 - 10:17am by Sharpe Trade

When I listen to the conference call of a company, I take some notes. And therefore … I thought that to help out new folks as they navigate conference calls, I would start posting my notes, as I’ve taken them. Perhaps, we can make this a continual feature here at Sharpe Trade with the stocks that we have mentioned in the Sharpe Income project.

This week, it was the Union Pacific (UNP) call, that you can find here.

Union Pacific (UNP) – Daily Chart

Union Pacific UNP Conference Call Quarterly

So what’s ‘the low-down’ for this quarter?

A few notes from my desk as I listened to the conference call

Union Pacific Corporation UNP Earnings Notes

It was sort of funny.  As I started the call, the recorded audio must have skipped.  Because instead of saying “Welcome to Union Pacific’s (UNP) Second Quarter conference call …“, the audio skipped, and instead spit out ….  “Good morning, and welcome to Union Pacific’s (UNP) second quarter … significant volume decreases“.

A bit of synchronicity with that audio error.  Because that pretty well sums up the quarter.

Boy … am I glad that I did not put the stock into the Sharpe Income project as of yet.

If you remember our brief notes on Union Pacific (UNP) from the last quarter, UNP reported a ‘sharp drop in volume’ of what was shipped by the railroad by 2%.  This trend picked up in the last quarter, as volume’s of what was shipped dropped farther.  Shippings of Coal was down by more than 25% (as outlined by the company officials earlier in the quarter).  Automotive shipping increased by 7%.  IntermModal was up 2%.  Chemicals was basically flat.  Agricultural shipping down by 7%, and Industrial down by 13%.  At the same time, challenges were also faced with weak exports on what has been mentioned again … a strong U.S. Dollar.

And as we stated in earlier entries.  This is what happens with transport companies.  They constantly have to balance their operations to account for such slow-downs in their business.  Which is what Union Pacific (UNP) is currently doing.  Storing locomotives.  Furloughing workers.  Making the business overall, more effecient.  

I was actually surprised at how well they performed, given the challenges they have been discussing for the last three months.  The street expected the company to only earn $1.38 per share, which would represent a decrease from last year.  And although the company did experience a 3% decrease year over year, they were able to earn $1.38 per share.

I continue to hold this company for my own personal income accounts.  Sharpe Trade, LLC does not hold any stock in Union Pacific (UNP).  I will purchase more in the future, but I do not feel we will see a purchase point for some time.  Technically, Union Pacific (UNP) broke down, and I would expect to see lower prices.  Good.  Let it work itself out, and I will continue to evaluate the business.

If I was forced to put this quarter into a few sentence?

The shipping slowdown continues.  However, in the transport business this is a known, cyclical issue that must be met by balancing the business via operating margins.  While expecting lower stock prices, I remain confident that Union Pacific (UNP) is handeling this challenge well.  

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