Union Pacific Corporation (UNP): The Balancing Act of Volume’s

Posted on Apr 24 2015 - 10:35am by Sharpe Trade

For years, I have stated that new investors should tune into companies quarterly conference calls, presented to Shareholders.  The benefits are numerous and many.

It only generally takes one hour or so, every three months.

One can become familiar with the business with which one is invested.

One can listen to the board members of various corporations around the planet, as they attempt to manage businesses worth billions of dollars.  You’re not listening to some doofus and his thoughts on the economy who has no stake in issues facing the economy.  You’re not listening to my thoughts on the economy.  You are listening to board members discuss the very real issues they face as they manage corporations worth billions.

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.

Union Pacific (UNP) reported earnings yesterday and as you folks may or may not know, this is a stock I have in the equity section of my own personal income accounts.

So what’s ‘the skinny’?

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

Union Pacific UNP Desktop Notes

My basic take-away is that they were caught a bit last quarter in the every present balancing act that all transportation companies face. It doesn’t matter if it is Oceanic transport, or the Rails.  If you have increased demand for shipping, you have to adjust your ability to ship those higher volumes.  However, any transport company knows that volumes can subsequently drop, and you’ve spent time and money increasing your ability to ship on a market that has dried up (As a side note, this ‘balancing act’ between demand, and then a drop-off in demand is what destroyed the oceanic shippers from the 2008 Financial Crisis).

My personal belief, is that Union Pacific (UNP) is handling this particular ‘shift’ very well.  Among the Rails, Union Pacific (UNP) has great mix.  Their balance sheet is like a Fortress and they have great financial maneuverability.  Management has proven itself adept at volume and mix shifts in the past.  

If I was forced to put this quarter into one sentence?

I am comfortable as a shareholder and although it was a soft quarter that fit with our previous economic view, they are adjusting well, and have better financial flexibility than their peers; and I am expecting lower common stock prices. 

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