Union Pacific Corporation · NYSE:UNP
Union Pacific — Q4 2023 Earnings Presentation
28 slides from Union Pacific's earnings presentation, Jan 25, 2024
Slide 1: Fourth Quarter 2023 Earnings
UNION PACIFIC CORPORATION FOURTH QUARTER 2023 EARNINGS JANUARY 25, 2024 1 EXECUTIVE SUMMARY FOURTH QUARTER 2023 Jim Vena Chief Executive Officer 2 2
Slide 2: Executive Summary
UNION PACIFIC CORPORATION FOURTH QUARTER 2023 EARNINGS JANUARY 25, 2024 1 EXECUTIVE SUMMARY FOURTH QUARTER 2023 Jim Vena Chief Executive Officer 2 2
Slide 3: Fourth Quarter Highlights & Executive Summary
Fourth Quarter Highlights & Executive Summary Highlights Executive Summary $2.71 Earnings per Share • Team demonstrated early success behind strategy of safety, $2.4B Operating Income service, and operational excellence $6.2B Operating Revenue • Volume and productivity offset inflationary pressures
Slide 4: Financial Review
Fourth Quarter Highlights & Executive Summary Highlights Executive Summary $2.71 Earnings per Share • Team demonstrated early success behind strategy of safety, $2.4B Operating Income service, and operational excellence $6.2B Operating Revenue • Volume and productivity offset inflationary pressures
Slide 5: Fourth Quarter Income Statement
Fourth Quarter Income Statement Freight Revenue Drivers: 2023 2022 Variance Operating Revenues $6,159- $6,180- -- Volume 3.50% Operating Expenses 3,752- 3,768- -- Price/Mix 0.75% Operating Income 2,407- 2,412- -- % Fuel Surcharge (3.75%) Other Income 108- 92- (17) Operating Expense Drivers: Interest
Slide 6: 2023 Full Year Reported Results
Fourth Quarter Income Statement Freight Revenue Drivers: 2023 2022 Variance Operating Revenues $6,159- $6,180- -- Volume 3.50% Operating Expenses 3,752- 3,768- -- Price/Mix 0.75% Operating Income 2,407- 2,412- -- % Fuel Surcharge (3.75%) Other Income 108- 92- (17) Operating Expense Drivers: Interest
Slide 7: 2023 Full Year Cash Generation, Debt, & Returns to Shareholders
2023 Full Year Cash Generation, Debt, & Returns to Shareholders Cash From Operations Cash Returns to Shareholders $9,441 $9,362 $8,379 82% Share $6,282 Cash Flow Repurchases $3,878 Conversion* 75% $705 Dividends $3,159 $3,173 2022 2023 2022 2023 Free Cash Flow* Adjusted Debt* $2,732 $34,957 $34,179
Slide 8: Marketing & Sales Review
2023 Full Year Cash Generation, Debt, & Returns to Shareholders Cash From Operations Cash Returns to Shareholders $9,441 $9,362 $8,379 82% Share $6,282 Cash Flow Repurchases $3,878 Conversion* 75% $705 Dividends $3,159 $3,173 2022 2023 2022 2023 Free Cash Flow* Adjusted Debt* $2,732 $34,957 $34,179
Slide 9: Fourth Quarter Commodity Review
Fourth Quarter Commodity Review Commodity Revenue Volume ARC Quarterly Drivers • Strong Demand for Fall Fertilizer Application Bulk $1,938 522K $3,712 • Grain Products Business Development (BD) Wins vs. 4Q’22 Flat 3% 2% • Coal Challenged from Low Natural Gas Prices & Weather • Petroleum & LPG BD Win
Slide 10: 2024 Economic Indicators
Fourth Quarter Commodity Review Commodity Revenue Volume ARC Quarterly Drivers • Strong Demand for Fall Fertilizer Application Bulk $1,938 522K $3,712 • Grain Products Business Development (BD) Wins vs. 4Q’22 Flat 3% 2% • Coal Challenged from Low Natural Gas Prices & Weather • Petroleum & LPG BD Win
Slide 11: 2024 Volume Outlook
2024 Volume Outlook Bulk Industrial Premium Coal Construction International Intermodal Grain + Petroleum ? Domestic Intermodal + Fertilizer and Biofuel + Petrochemicals + Automotive Feedstocks 11 11 OPERATIONS REVIEW FOURTH QUARTER 2023 Eric Gehringer Executive Vice President – Operations 12 12
Slide 12: Operations Review
2024 Volume Outlook Bulk Industrial Premium Coal Construction International Intermodal Grain + Petroleum ? Domestic Intermodal + Fertilizer and Biofuel + Petrochemicals + Automotive Feedstocks 11 11 OPERATIONS REVIEW FOURTH QUARTER 2023 Eric Gehringer Executive Vice President – Operations 12 12
Slide 13: Key Performance Metrics
FOURTH QUARTER 2023 Key Performance Metrics 2023 Reportable Derailment Rates Improved Freight Car Intermodal Trip Manifest/Auto Trip Velocity Plan Compliance Plan Compliance (Daily Miles per Car) (% of Boxes on Time) (% of Cars on Time) 217 85 70 14% 12pts 12 pts Quarterly Drivers Increased Improved
Slide 14: Key Efficiency Metrics
FOURTH QUARTER 2023 Key Performance Metrics 2023 Reportable Derailment Rates Improved Freight Car Intermodal Trip Manifest/Auto Trip Velocity Plan Compliance Plan Compliance (Daily Miles per Car) (% of Boxes on Time) (% of Cars on Time) 217 85 70 14% 12pts 12 pts Quarterly Drivers Increased Improved
Slide 15: Investing in Our Franchise: 2024 Capital Plan
Investing in Our Franchise Union Pacific 2024 Capital Plan of $3.4 Billion $1.9 B Infrastructure Replacement Rail, Ties, & Ballast $0.6 B Locomotive & Equipment Locomotive Modernizations & Freight Cars Capital Program $3.7 $3.4 $3.4 $0.6 B Capacity & Commercial Facilities Intermodal Terminals, Sidin
Slide 16: 2024 Full Year Outlook
Investing in Our Franchise Union Pacific 2024 Capital Plan of $3.4 Billion $1.9 B Infrastructure Replacement Rail, Ties, & Ballast $0.6 B Locomotive & Equipment Locomotive Modernizations & Freight Cars Capital Program $3.7 $3.4 $3.4 $0.6 B Capacity & Commercial Facilities Intermodal Terminals, Sidin
Slide 17: 2024 Outlook
2024 Outlook • Volume Outlook Muted by International Intermodal Business Loss, Lower Coal Demand, and Soft Economic Conditions • Pricing Dollars in Excess of Inflation Dollars • No Change to Long-Term Capital Allocation Strategy ‒ Capital Plan of $3.4 Billion ‒ No First Quarter Share Repurchases 17
Slide 18: How We Win
2024 Outlook • Volume Outlook Muted by International Intermodal Business Loss, Lower Coal Demand, and Soft Economic Conditions • Pricing Dollars in Excess of Inflation Dollars • No Change to Long-Term Capital Allocation Strategy ‒ Capital Plan of $3.4 Billion ‒ No First Quarter Share Repurchases 17
Slide 19: How We Win: Safety + Service & Operational Excellence
HOW WE WIN SAFETY + SERVICE & OPERATIONAL EXCELLENCE 19 19 Cautionary Information This presentation and related materials contain statements about the Company’s future that are not statements of historical fact, including specifically the statements regarding the Company’s expectations with respect
Slide 20: Cautionary Information
HOW WE WIN SAFETY + SERVICE & OPERATIONAL EXCELLENCE 19 19 Cautionary Information This presentation and related materials contain statements about the Company’s future that are not statements of historical fact, including specifically the statements regarding the Company’s expectations with respect
Slide 21: Question & Answer Session
QUESTION & ANSWER SESSION THANK YOU 21 APPENDIX 22 22
Slide 22: Appendix
QUESTION & ANSWER SESSION THANK YOU 21 APPENDIX 22 22
Slide 23: Fourth Quarter 2023 Operating Ratio and EPS
Fourth Quarter 2023 Operating Ratio and EPS Favorable / (Unfavorable) Operating Ratio EPS Fourth Quarter 2022 Reported 61.0% $2.67 Fuel Price (net) (0.0 pts ($0.11) Casualty (0.6) pts ($0.05) Core Results (0.7 pts ($0.20 Fourth Quarter 2023 Reported 60.9% $2.71 23 23 Full Year 2023 Operating Ratio a
Slide 24: Full Year 2023 Operating Ratio and EPS
Fourth Quarter 2023 Operating Ratio and EPS Favorable / (Unfavorable) Operating Ratio EPS Fourth Quarter 2022 Reported 61.0% $2.67 Fuel Price (net) (0.0 pts ($0.11) Casualty (0.6) pts ($0.05) Core Results (0.7 pts ($0.20 Fourth Quarter 2023 Reported 60.9% $2.71 23 23 Full Year 2023 Operating Ratio a
Slide 25: Increased Volumes and Core Pricing Gains Offset by Lower Fuel Surcharge and Mix
Increased Volumes and Core Pricing Gains Offset by Lower Fuel Surcharge and Mix Freight Revenues $ in Millions $197 ($214) $5,768 $50 $5,801 +3.50% (3.75%) +0.75% 162 157 4Q Volume Fuel Surcharge Price/Mix 4Q 2022 2023 25 7 Day Volume (000s) 25 Lower Fuel Prices Offset by Inflation and Increased Cas
Slide 26: Lower Fuel Prices Offset by Inflation and Increased Casualty Expenses
Increased Volumes and Core Pricing Gains Offset by Lower Fuel Surcharge and Mix Freight Revenues $ in Millions $197 ($214) $5,768 $50 $5,801 +3.50% (3.75%) +0.75% 162 157 4Q Volume Fuel Surcharge Price/Mix 4Q 2022 2023 25 7 Day Volume (000s) 25 Lower Fuel Prices Offset by Inflation and Increased Cas
Slide 27: 2024 Full Year Financial Assumptions
2024 Full Year Financial Assumptions • Inflation (excluding fuel): ~5% • Compensation & Benefits Inflation: ~5% • Fuel Price: ~$3.00 per gallon • Depreciation: Up ~3.5% vs. 2023 • Other Expense: Flat to down vs. 2023 • Reported Other Income: Decline of ~$100 million vs. 2023 ‒ First Quarter 2023 inc
Slide 28: 2024 Full Year Financial Assumptions
2024 Full Year Financial Assumptions • Inflation (excluding fuel): ~5% • Compensation & Benefits Inflation: ~5% • Fuel Price: ~$3.00 per gallon • Depreciation: Up ~3.5% vs. 2023 • Other Expense: Flat to down vs. 2023 • Reported Other Income: Decline of ~$100 million vs. 2023 ‒ First Quarter 2023 inc