Coronavirus gives Union Pacific's 2nd quarter earnings a chill
July 23rd, 2020
July 23, 2020 - TRA Newswire -
Union Pacific Railroad's second quarter took a 20 percent hit in volume as the Coronavirus slowed down economic activity across its operations. Income slipped from $1.6 billion last year to $1.1 billion in this latest reporting quarter.
Summary of Second Quarter Freight Revenues
Bulk down 17 percent
Industrial down 23 percent
Premium down 33 percent
Operating revenue of $4.2 billion was down 24 percent in second quarter 2020, compared to second quarter 2019. Second quarter business volumes, as measured by total revenue carloads, decreased 20 percent compared to 2019. Volumes for all three business teams – bulk, industrial, and premium – declined in the quarter due to the deteriorating economic conditions brought on by the COVID-19 pandemic. In addition quarterly freight revenue declined 24 percent, compared to second quarter 2019, as core pricing gains were offset by lower volumes, negative business mix and decreased fuel surcharge revenue.
"The Second Quarter proved very challenging as we faced a volume decline of 20 percent due to the economic impact of the COVID-19 pandemic. Demonstrating the transformation our Company is experiencing through the implementation of Unified Plan 2020, we were able to largely mitigate the impact of that volume loss," said Lance Fritz, Union Pacific chairman, president and chief executive officer. "Our dedicated employees are feeling a very real impact from this pandemic, making tangible sacrifices. Despite this adversity, they continue to make strides to improve the safety of our railroad, while providing our customers an uninterrupted, enhanced service product."
However, Union Pacific's 61 percent operating ratio increased 1.4 points compared to second quarter 2019. Freight car velocity was 225 daily miles per car, an 11 percent improvement compared to second quarter 2019, thanks in part to Precision Scheduled Railroading. Better equipment utilization showed up in the quarterly locomotive productivity rate which was 136 GTMs per horsepower day, a 12 percent improvement compared to second quarter 2019. PSR resulted in the average maximum train length of 8,664 feet, a 13 percent increase compared to second quarter 2019. It also didn't hurt that the $1.26 per gallon average quarterly diesel fuel price in second quarter 2020 was 43 percent lower than second quarter 2019.
Although the state of global economy is somewhat uncertain given the lingering impact of the COVID-19 pandemic, Union Pacific said that it currently expects full year 2020 carload volumes to be down around 10 percent or so compared to 2019.
"Our first priority continues to be the health and safety of our employees during the pandemic, as they perform critical service to support economic recovery," Fritz said. "Our ability to be nimble and flexible in adjusting our resources to rapidly changing volumes, while providing a high level service product, demonstrates the strength of our service model. We remain focused on providing our customers with a safe, reliable and efficient service product."
Union Pacific Railroad's second quarter took a 20 percent hit in volume as the Coronavirus slowed down economic activity across its operations. Income slipped from $1.6 billion last year to $1.1 billion in this latest reporting quarter.
Summary of Second Quarter Freight Revenues
Bulk down 17 percent
Industrial down 23 percent
Premium down 33 percent
Operating revenue of $4.2 billion was down 24 percent in second quarter 2020, compared to second quarter 2019. Second quarter business volumes, as measured by total revenue carloads, decreased 20 percent compared to 2019. Volumes for all three business teams – bulk, industrial, and premium – declined in the quarter due to the deteriorating economic conditions brought on by the COVID-19 pandemic. In addition quarterly freight revenue declined 24 percent, compared to second quarter 2019, as core pricing gains were offset by lower volumes, negative business mix and decreased fuel surcharge revenue.
"The Second Quarter proved very challenging as we faced a volume decline of 20 percent due to the economic impact of the COVID-19 pandemic. Demonstrating the transformation our Company is experiencing through the implementation of Unified Plan 2020, we were able to largely mitigate the impact of that volume loss," said Lance Fritz, Union Pacific chairman, president and chief executive officer. "Our dedicated employees are feeling a very real impact from this pandemic, making tangible sacrifices. Despite this adversity, they continue to make strides to improve the safety of our railroad, while providing our customers an uninterrupted, enhanced service product."
However, Union Pacific's 61 percent operating ratio increased 1.4 points compared to second quarter 2019. Freight car velocity was 225 daily miles per car, an 11 percent improvement compared to second quarter 2019, thanks in part to Precision Scheduled Railroading. Better equipment utilization showed up in the quarterly locomotive productivity rate which was 136 GTMs per horsepower day, a 12 percent improvement compared to second quarter 2019. PSR resulted in the average maximum train length of 8,664 feet, a 13 percent increase compared to second quarter 2019. It also didn't hurt that the $1.26 per gallon average quarterly diesel fuel price in second quarter 2020 was 43 percent lower than second quarter 2019.
Although the state of global economy is somewhat uncertain given the lingering impact of the COVID-19 pandemic, Union Pacific said that it currently expects full year 2020 carload volumes to be down around 10 percent or so compared to 2019.
"Our first priority continues to be the health and safety of our employees during the pandemic, as they perform critical service to support economic recovery," Fritz said. "Our ability to be nimble and flexible in adjusting our resources to rapidly changing volumes, while providing a high level service product, demonstrates the strength of our service model. We remain focused on providing our customers with a safe, reliable and efficient service product."