Union Pacific Corporation · NYSE:UNP
Union Pacific — Q2 2023 Earnings Presentation
24 slides from Union Pacific's earnings presentation, Jul 26, 2023
Slide 1: Second Quarter 2023 Earnings Release
SECOND QUARTER 2023 EARNINGS RELEASE Lance Fritz, Chairman, President, & CEO July 26, 2023
Slide 2: Second Quarter 2023 Results
Second Quarter 2023 Results Earnings Per Share Operating Ratio 63.0% $2.93 $2.57 60.2% 2.8 pts vs 2022 (12%) vs 2022 2Q 2022 2Q 2023 2Q 2022 2Q 2023 Key Themes Soft Demand Environment Inflationary Pressures One-Time Ratification Bonus 2
Slide 3: Marketing & Sales Review
SECOND QUARTER 2023 MARKETING & SALES REVIEW Kenny Rocker Executive Vice President – Marketing & Sales 3
Slide 4: Bulk
SECOND QUARTER 2023 Bulk Revenue $1,757 (-3%) Volume 492K (-1%) ARC $3,568 (-2%) Major Markets Grain & Fertilizer Food & Coal & Grain Products Refrigerated Renewables 195 197 202 203 +1% Flat 53 48 48 44 -9% -8% 2Q 2022 2Q 2023 2Q 2022 2Q 2023 2Q 2022 2Q 2023 2Q 2022 2Q 2023 Quarterly Drivers Reduce
Slide 5: Industrial
SECOND QUARTER 2023 Industrial Revenue $2,086 (Flat) Volume 573K (+1%) ARC $3,646 (-1%) Major Markets Industrial Chemicals Metals & Forest Energy & & Plastics Minerals Products Specialized 205 210 161 164 +2% 141 144 +2% +2% 63 55 -13% 2Q 2022 2Q 2023 2Q 2022 2Q 2023 2Q 2022 2Q 2023 2Q 2022 2Q 2023
Slide 6: Premium
SECOND QUARTER 2023 Premium Revenue $1,726 (-11%) Volume 962K (-4%) ARC $1,794 (-8%) Major Markets Automotive Intermodal 805 749 -7% 192 213 +11% 2Q 2022 2Q 2023 2Q 2022 2Q 2023 Quarterly Drivers Continued Autos High Retail Inventory & Weak US West Coast Imports Inventory Restocking Increased Truck
Slide 7: Second Half 2023 Volume Outlook
Second Half 2023 Volume Outlook Bulk Industrial Premium Coal Industrial Production Domestic Intermodal Grain Forest Products International Intermodal Biofuels Metals Automotive Construction Current 2023 Full Year Industrial Production Forecast: +0.1% 7
Slide 8: Operations Review
SECOND QUARTER 2023 OPERATIONS REVIEW Eric Gehringer Executive Vice President – Operating 8
Slide 9: Continued Safety Performance Improvement
Continued Safety Performance Improvement • Safety of employees, customers and communities we serve is our top priority • Rail is safest way to move freight over land • Technology is further enabling our safety efforts Safety Performance (First Half 2023 vs. First Half 2022) Derailments -9% Good Pers
Slide 10: Key Performance Metrics
SECOND QUARTER 2023 Key Performance Metrics FREIGHT CAR VELOCITY INTERMODAL TRIP PLAN MANIFEST/AUTO (Daily Miles per Car) COMPLIANCE TRIP PLAN COMPLIANCE (% of Boxes On Time) (% of Cars On Time) 202 187 79 62 64 56 2Q 2022 2Q 2023 2Q 2022 2Q 2023 2Q 2022 2Q 2023 1Q 2023: 196 1Q 2023: 72 1Q 2023: 61
Slide 11: Key Efficiency Metrics
SECOND QUARTER 2023 Key Efficiency Metrics LOCOMOTIVE WORKFORCE TRAIN LENGTH PRODUCTIVITY PRODUCTIVITY (Max on Route, in Feet) (GTMs Per HP Day) (Daily Miles per FTE) 9,439 9,316 1,034 983 126 123 2Q 2022 2Q 2023 2Q 2022 2Q 2023 2Q 2022 2Q 2023 1Q 2023: 123 1Q 2023: 991 1Q 2023: 9,159 Quarterly Driv
Slide 12: Historic Agreements Drive Engagement and Productivity
Historic Agreements Drive Engagement and Productivity Train, Engine, & Yard FTEs* +7% 12,341 1) Paid Sick Leave 11,544 11,519 11,571 11,874 • Employees receive more paid time off to take care of themselves and their families Active TE&Y +1% • Improves attractiveness of jobs Q2'22 Q3'22 Q4'22 Q1'23 Q
Slide 13: Financial Review
SECOND QUARTER 2023 FINANCIAL REVIEW Jennifer Hamann Executive Vice President & Chief Financial Officer 13
Slide 14: Second Quarter Operating Ratio and EPS
Second Quarter Operating Ratio and EPS Favorable / (Unfavorable) Operating Ratio EPS Second Quarter 2022 60.2% $2.93 2023 Brakeperson Buyout Payment (1.1) pts ($0.09) Fuel Price (net) 2.0 pts $0.04 Core Results (3.7) pts ($0.24) 2023 Nebraska State Income Tax Benefit N/A $0.12 2022 Real Estate Gain
Slide 15: Second Quarter Income Statement
Second Quarter Income Statement 2023 vs. 2023 2022 2022 Operating Revenues $5,963- $6,269- (5)--- % Operating Expenses 3,759- 3,774- -)--- Operating Income 2,204- 2,495- (12)--- Other Income 93- 163- (43)--- Interest Expense (339) (316) 7)--- Income Taxes (389) (507) (23))-- Net Income $1,569- $1,83
Slide 16: Impact of Core Pricing Gains Offset by Reduced Fuel Surcharge
Impact of Core Pricing Gains Offset by Reduced Fuel Surcharge, Lower Volumes, and Unfavorable Mix Freight Revenues $ in Millions (5%) $5,842 ($107) $5,569 ($248) $82 160 157 Volume Fuel Surcharge Price/Mix (1.75%) (4.25%) 1.50% 2Q 2Q 2022 2023 16 7 Day Volume (000s)
Slide 17: Inflation & Labor Increases Offset by Declining Fuel Prices
Inflation & Labor Increases Offset by Declining Fuel Prices Operating Expenses $ in Millions $3,774 $3,759 $177 $18 $20 ($276) $28 $18 16% (29%) 5% 3% 8% 6% Compensation Fuel Purchased Depreciation Equipment Other & Benefits Services & & Other Materials Rents 2Q 2Q 2022 2023 17
Slide 18: Cash Generation & Returns to Shareholders
Cash Generation & Returns to Shareholders Cash From Operations ($ in millions) Year to Date Results Labor Settlements $445 $4,167 • Generated $3.9 Billion in Cash From Operations Cash Flow $3,858 73% Conversion* 70% – Decrease driven by $445 million of payments related to labor union agreement settl
Slide 19: 2023 Outlook Pressured by Challenging Demand and Cost Environment
2023 Outlook Pressured by Challenging Demand and Cost Environment • Consumer-Related Volumes Likely Drive Full Year Volume Expectations Below Industrial Production • Pricing Dollars in Excess of Inflation Dollars • Forecasting $50 to $70 million in Labor Expense from New Agreements in Second Half of
Slide 20: Second Quarter 2023 – Lance Fritz
SECOND QUARTER 2023 Lance Fritz Chairman, President & CEO 20
Slide 21: 2023 Success Drivers
2023 Success Drivers Safety & Right Business, Service Right Price Reliability Rebuild & Invest Wisely; Engage Drive Efficiency 21
Slide 22: Cautionary Information
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 to economic conditions and demand levels, its ability to im
Slide 23: Question & Answer Session
QUESTION & ANSWER SESSION
Slide 24: Slide 24