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Union Pacific Reports Fourth Quarter and Full Year 2022 Results

Union Pacific Reports Fourth Quarter and Full Year 2022 Results
PR Newswire
OMAHA, Neb., Jan. 24, 2023

Fourth quarter earnings per diluted share of $2.67Fourth quarter operating revenue up 8%Full year earnings per diluted share of $11.21Full year o…

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Union Pacific Reports Fourth Quarter and Full Year 2022 Results

PR Newswire

  • Fourth quarter earnings per diluted share of $2.67
  • Fourth quarter operating revenue up 8%
  • Full year earnings per diluted share of $11.21
  • Full year operating income up 6%

OMAHA, Neb., Jan. 24, 2023 /PRNewswire/ -- Union Pacific Corporation (NYSE: UNP) today reported 2022 fourth quarter net income of $1.6 billion, or $2.67 per diluted share. This compares to 2021 fourth quarter net income of $1.7 billion, or $2.66 per diluted share.

Reported net income for full year 2022 was $7.0 billion, or $11.21 per diluted share. These full year results compare to full year 2021 net income of $6.5 billion, or $9.95 per diluted share.

"In the fourth quarter, we grew carloads as we continued to face challenges hiring craft professionals in critical locations and experienced the impact of extreme winter weather on our network in December," said Lance Fritz, Union Pacific chairman, president, and chief executive officer. "As a result, revenue growth was more than offset by elevated operating expenses from operational inefficiencies and a higher inflationary environment. For the full year, we made good progress on employee safety, and we took another step toward our sustainability goals as our fuel consumption rate improved for the fourth consecutive year. Looking to 2023, we expect continued improvements in network fluidity to support business development, generating volume growth that exceeds industrial production. We also expect network improvements to help us recapture lost productivity while providing customers with reliable service."

Fourth Quarter Summary

Financial Results: Revenue Growth Offset by Higher Expenses Associated with Inflation and Network Recovery; Fourth Quarter Record for Operating Revenue
Fourth Quarter 2022 Compared to Fourth Quarter 2021

  • Operating revenue of $6.2 billion was up 8% driven by higher fuel surcharge revenue, core pricing gains, and volume growth, partially offset by a negative business mix.
  • Business volumes, as measured by total revenue carloads, were up 1%.
  • Union Pacific's 61.0% operating ratio deteriorated 360 basis points. Falling fuel prices late in the quarter positively impacted the operating ratio by 20 basis points.
  • Operating income of $2.4 billion declined 1%.
  • The company repurchased 3.5 million shares in fourth quarter 2022 at an aggregate cost of $0.7 billion.

Operating Performance: Service and Efficiency Measures Impacted by Network Congestion and Winter Weather; Fourth Quarter Record for Fuel Consumption Rate
Fourth Quarter 2022 Compared to Fourth Quarter 2021

  • Quarterly freight car velocity was 191 daily miles per car, a 3% decline.
  • Quarterly locomotive productivity was 123 gross ton-miles (GTMs) per horsepower day, a 5% decline.
  • Average maximum train length decreased 1% to 9,191 feet.
  • Quarterly workforce productivity decreased 3% to 1,010 car miles per employee.
  • Fuel consumption rate of 1.064, measured in gallons of fuel per thousand GTMs, improved 2%.

2022 Full Year Summary

Financial Results: Fuel Surcharge, Core Pricing Gains, and Volume Drive Revenue Growth; Records for Operating Revenue, Operating Income, Net Income, and Earnings Per Share
Full Year 2022 Compared to Full Year 2021

  • Operating revenue of $24.9 billion was up 14% driven by higher fuel surcharge revenue, core pricing gains, and volume growth.
  • Business volumes, as measured by total revenue carloads, grew 2%.
  • Union Pacific's 60.1% reported operating ratio deteriorated 290 basis points. Higher fuel prices negatively impacted the operating ratio by 20 basis points and the prior period adjustment related to new labor agreements added 30 basis points to operating ratio.
  • Operating Income of $9.9 billion was up 6%.
  • Union Pacific's 2022 capital program totaled $3.4 billion.
  • The company repurchased 27.1 million shares in 2022 at an aggregate cost of $6.3 billion.

Operating Performance: Network Operations Impacted by Crew Availability and Operational Inefficiencies; Record for Fuel Consumption Rate
Full Year 2022 Compared to Full Year 2021

  • Union Pacific's reportable personal injury rate improved 18% to 0.80 per 200,000 employee-hours compared to 0.98 for full year 2021.
  • Freight car velocity was 191 daily miles per car, a 6% decline.
  • Locomotive productivity was 125 GTMs per horsepower day, a 6% decline.
  • Average maximum train length of 9,329 feet was flat.
  • Workforce productivity of 1,036 car miles per employee was flat.
  • Fuel consumption rate of 1.078, measured in gallons of fuel per thousand GTMs, improved 1%.

2023 Guidance

  • Full year carloads to exceed Industrial Production
    • Current Industrial Production forecast: -0.5%
  • Full year operating ratio improvement
  • Pricing dollars in excess of inflation dollars
  • Capital Allocation:
    • Capital spending less than 15% of revenue
      • Capital plan of $3.6 billion
    • Long term dividend payout target of ~45% of earnings
    • Excess cash to share repurchases

Fourth Quarter 2022 Earnings Conference Call

Union Pacific will webcast its fourth quarter 2022 earnings release presentation live at www.up.com/investor and via teleconference on Tuesday, January 24, 2023, at 8:45 a.m. Eastern Time. Participants may join the conference call by dialing 877-407-8293 (or for international participants, 201-689-8349).

ABOUT UNION PACIFIC

Union Pacific (NYSE: UNP) delivers the goods families and businesses use every day with safe, reliable, and efficient service. Operating in 23 western states, the company connects its customers and communities to the global economy. Trains are the most environmentally responsible way to move freight, helping Union Pacific protect future generations. More information about Union Pacific is available at www.up.com.

Supplemental financial information is attached. 

This news release 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 improve network performance (including those in response to increased traffic), its results of operations, and potential impacts of the COVID-19 pandemic and the Russian-Ukraine conflict.  These statements are, or will be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements also generally include, without limitation, information, or statements regarding: projections, predictions, expectations, estimates, or forecasts as to the Company's and its subsidiaries' business, financial, and operational results, and future economic performance; and management's beliefs, expectations, goals, and objectives and other similar expressions concerning matters that are not historical facts.

Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times that, or by which, such performance or results will be achieved. Forward-looking information, including expectations regarding operational and financial improvements and the Company's future performance or results are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the statement. Important factors, including risk factors, could affect the Company's and its subsidiaries' future results and could cause those results or other outcomes to differ materially from those expressed or implied in the forward-looking statements. Information regarding risk factors and other cautionary information are available in the Company's Annual Report on Form 10-K for 2021, which was filed with the SEC on February 4, 2022. The Company updates information regarding risk factors if circumstances require such updates in its periodic reports on Form 10-Q and its subsequent Annual Reports on Form 10-K (or such other reports that may be filed with the SEC).

Forward-looking statements speak only as of, and are based only upon information available on, the date the statements were made. The Company assumes no obligation to update forward-looking information to reflect actual results, changes in assumptions, or changes in other factors affecting forward-looking information. If the Company does update one or more forward-looking statements, no inference should be drawn that the Company will make additional updates with respect thereto or with respect to other forward-looking statements. References to our website are provided for convenience and, therefore, information on or available through the website is not, and should not be deemed to be, incorporated by reference herein.

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Income (unaudited)

 

Millions, Except Per Share Amounts and

4th Quarter



Full Year


Percentages, For the Periods Ended December 31,

2022



2021



%



2022



2021



%


Operating Revenues

























Freight revenues


$

5,768



$

5,297




9

%


$

23,159



$

20,244




14

%

Other revenues



412




436




(6)




1,716




1,560




10


Total operating revenues



6,180




5,733




8




24,875




21,804




14


Operating Expenses

























Compensation and benefits



1,174




1,070




10




4,645




4,158




12


Fuel



853




597




43




3,439




2,049




68


Purchased services and materials



633




538




18




2,442




2,016




21


Depreciation



569




556




2




2,246




2,208




2


Equipment and other rents



238




230




3




898




859




5


Other



301




302




-




1,288




1,176




10


Total operating expenses



3,768




3,293




14




14,958




12,466




20


Operating Income



2,412




2,440




(1)




9,917




9,338




6


Other income, net



92




83




11




426




297




43


Interest expense



(333)




(295)




13




(1,271)




(1,157)




10


Income before income taxes



2,171




2,228




(3)




9,072




8,478




7


Income taxes



(533)




(517)




3




(2,074)




(1,955)




6


Net Income


$

1,638



$

1,711




(4)



$

6,998



$

6,523




7



























Share and Per Share

























Earnings per share - basic


$

2.67



$

2.67




-

%


$

11.24



$

9.98




13

%

Earnings per share - diluted


$

2.67



$

2.66




-



$

11.21



$

9.95




13


Weighted average number of shares - basic

612.7




640.4




(4)




622.7




653.8




(5)


Weighted average number of shares - diluted

613.7




642.1




(4)




624.0




655.4




(5)


Dividends declared per share


$

1.30



$

1.18




10



$

5.08



$

4.29




18



























Operating Ratio



61.0

%



57.4

%



3.6

pts



60.1

%



57.2

%



2.9

pts

Effective Tax Rate



24.6

%



23.2

%



1.4




22.9

%



23.1

%



(0.2)


 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Freight Revenues Statistics (unaudited)

 



4th Quarter



Full Year


For the Periods Ended December 31,


2022



2021



%



2022



2021



%


Freight Revenues (Millions)

























Grain & grain products


$

974



$

889




10

%


$

3,598



$

3,181




13

%

Fertilizer



171




176




(3)




712




697




2


Food & refrigerated



265




259




2




1,093




998




10


Coal & renewables



523




485




8




2,134




1,780




20


Bulk



1,933




1,809




7




7,537




6,656




13


Industrial chemicals & plastics



502




507




(1)




2,158




1,943




11


Metals & minerals



548




481




14




2,196




1,811




21


Forest products



325




351




(7)




1,465




1,357




8


Energy & specialized markets



624




558




12




2,386




2,212




8


Industrial



1,999




1,897




5




8,205




7,323




12


Automotive



594




469




27




2,257




1,761




28


Intermodal



1,242




1,122




11




5,160




4,504




15


Premium



1,836




1,591




15




7,417




6,265




18


Total


$

5,768



$

5,297




9

%


$

23,159



$

20,244




14

%

Revenue Carloads (Thousands)

























Grain & grain products



208




213




(2)

%



798




805




(1)

%

Fertilizer



41




48




(15)




190




201




(5)


Food & refrigerated



44




48




(8)




187




189




(1)


Coal & renewables



215




215




-




885




819




8


Bulk



508




524




(3)




2,060




2,014




2


Industrial chemicals & plastics



151




157




(4)




637




606




5


Metals & minerals



196




181




8




785




697




13


Forest products



52




63




(17)




241




250




(4)


Energy & specialized markets



140




137




2




552




559




(1)


Industrial



539




538




-




2,215




2,112




5


Automotive



198




182




9




778




701




11


Intermodal [a]



743




728




2




3,116




3,211




(3)


Premium



941




910




3




3,894




3,912




-


Total



1,988




1,972




1

%



8,169




8,038




2

%

Average Revenue per Car

























Grain & grain products


$

4,681



$

4,187




12

%


$

4,509



$

3,953




14

%

Fertilizer



4,167




3,705




12




3,749




3,470




8


Food & refrigerated



5,957




5,409




10




5,844




5,279




11


Coal & renewables



2,431




2,251




8




2,410




2,173




11


Bulk



3,799




3,457




10




3,658




3,305




11


Industrial chemicals & plastics



3,335




3,242




3




3,388




3,207




6


Metals & minerals



2,790




2,659




5




2,797




2,598




8


Forest products



6,264




5,521




13




6,092




5,424




12


Energy & specialized markets



4,459




4,054




10




4,320




3,956




9


Industrial



3,711




3,522




5




3,704




3,467




7


Automotive



3,007




2,576




17




2,902




2,511




16


Intermodal [a]



1,672




1,541




9




1,656




1,403




18


Premium



1,953




1,748




12




1,905




1,601




19


Average


$

2,902



$

2,686




8

%


$

2,835



$

2,519




13

%




[a]

 For intermodal shipments each container or trailer equals one carload.

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Financial Position (unaudited)

 


Dec. 31,


Dec. 31,


Millions, Except Percentages


2022



2021


Assets









Cash and cash equivalents


$

973



$

960


Short-term investments



46




46


Other current assets



2,933




2,545


Investments



2,375




2,241


Properties, net



56,038




54,871


Operating lease assets



1,672




1,787


Other assets



1,412




1,075


Total assets


$

65,449



$

63,525











Liabilities and Common Shareholders' Equity









Debt due within one year


$

1,678



$

2,166


Other current liabilities



3,842




3,578


Debt due after one year



31,648




27,563


Operating lease liabilities



1,300




1,429


Deferred income taxes



13,033




12,675


Other long-term liabilities



1,785




1,953


Total liabilities



53,286




49,364


Total common shareholders' equity



12,163




14,161


Total liabilities and common shareholders' equity


$

65,449



$

63,525











Return on Average Common Shareholders' Equity

53.2

%



41.9

%

Return on Invested Capital as Adjusted (ROIC)*

17.3

%



16.4

%



*

ROIC is a non-GAAP measure; however, management believes that it is an important measure in evaluating the efficiency and effectiveness of our long-term capital investments. See page 9 for a reconciliation to GAAP.

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Cash Flows (unaudited)

 

Millions,


Full Year


For the Periods Ended December 31,


2022



2021


Operating Activities









Net income


$

6,998



$

6,523


Depreciation



2,246




2,208


Deferred and other income taxes



262




154


Other - net



(144)




147


Cash provided by operating activities



9,362




9,032











Investing Activities









Capital investments*



(3,620)




(2,936)


Maturities of short-term investments



46




94


Purchases of short-term investments



(46)




(70)


Other - net



149




203


Cash used in investing activities



(3,471)




(2,709)











Financing Activities









Share repurchase programs



(6,282)




(7,291)


Debt issued



6,080




4,201


Dividends paid



(3,159)




(2,800)


Debt repaid



(2,291)




(1,299)


Net issuance of commercial paper



(205)




325


Debt exchange



-




(270)


Other - net



(30)




(24)


Cash used in financing activities



(5,887)




(7,158)











Net Change in Cash, Cash Equivalents, and Restricted Cash

4




(835)


Cash, cash equivalents, and restricted cash at beginning of year


983




1,818


Cash, cash equivalents, and restricted cash at end of year

$

987



$

983











Free Cash Flow**









Cash provided by operating activities


$

9,362



$

9,032


Cash used in investing activities



(3,471)




(2,709)


Dividends paid



(3,159)




(2,800)


Free cash flow


$

2,732



$

3,523




*

Capital investments include locomotive and freight car early lease buyouts of $70 million in 2022 and $34 million in 2021.



**

Free cash flow is a non-GAAP measure; however, we believe this measure is important to management and investors in evaluating our financial performance and measures our ability to generate cash without additional external financing.

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Operating and Performance Statistics (unaudited)

 



4th Quarter



Full Year


For the Periods Ended December 31,


2022



2021



%



2022



2021



%


Operating/Performance Statistics

























Freight car velocity (daily miles per car)*



191




197




(3)

%



191




203




(6)

%

Average train speed (miles per hour)*



23.8




24.2




(2)




23.8




24.6




(3)


Average terminal dwell time (hours)*



24.5




24.4




-




24.4




23.7




3


Locomotive productivity (GTMs per horsepower day)

123




129




(5)




125




133




(6)


Gross ton-miles (GTMs) (millions)



208,949




209,970




-




843,443




817,919




3


Train length (feet)



9,191




9,319




(1)




9,329




9,334




-


Intermodal car trip plan compliance (%)**



73




78




(5)

pts



67




73




(6)

pts

Manifest/Automotive car trip plan compliance (%)**

58




58




-

pts



59




63




(4)

pts

Workforce productivity (car miles per employee)

1,010




1,046




(3)




1,036




1,038




-


Total employees (average)



31,120




29,989




4




30,717




29,905




3



























Locomotive Fuel Statistics

























Average fuel price per gallon consumed

$

3.70



$

2.53




46

%


$

3.65



$

2.23




64

%

Fuel consumed in gallons (millions)



222




228




(3)




909




888




2


Fuel consumption rate***



1.064




1.088




(2)




1.078




1.086




(1)



























Revenue Ton-Miles (Millions)

























Grain & grain products



20,683




21,656




(4)

%



79,725




79,520




-

%

Fertilizer



2,701




3,185




(15)




11,769




12,387




(5)


Food & refrigerated



4,576




4,651




(2)




17,965




18,475




(3)


Coal & renewables



21,847




22,795




(4)




91,824




85,586




7


Bulk



49,807




52,287




(5)




201,283




195,968




3


Industrial chemicals & plastics



6,626




7,257




(9)




29,572




30,048




(2)


Metals & minerals



9,367




8,611




9




37,827




32,993




15


Forest products



5,546




6,458




(14)




25,438




25,863




(2)


Energy & specialized markets



9,575




9,420




2




37,068




37,902




(2)


Industrial



31,114




31,746




(2)




129,905




126,806




2


Automotive



4,384




3,830




14




17,018




14,879




14


Intermodal



17,622




16,977




4




72,546




73,620




(1)


Premium



22,006




20,807




6




89,564




88,499




1


Total



102,927




104,840




(2)

%



420,752




411,273




2

%



*

Surface Transportation Board (STB) reported performance measures.



**

Methodology used to report is not comparable with the reporting to the STB under docket number EP 770.



***

Fuel consumption is computed as follows: gallons of fuel consumed divided by gross ton-miles in thousands.

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Income (unaudited)

 

Millions,

2022


Except Per Share Amounts and Percentages,

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

Full Year


Operating Revenues





















Freight revenues


$

5,440



$

5,842



$

6,109



$

5,768



$

23,159


Other revenues



420




427




457




412




1,716


Total operating revenues



5,860




6,269




6,566




6,180




24,875


Operating Expenses





















Compensation and benefits



1,101




1,092




1,278




1,174




4,645


Fuel



714




940




932




853




3,439


Purchased services and materials



561




622




626




633




2,442


Depreciation



555




559




563




569




2,246


Equipment and other rents



215




230




215




238




898


Other



337




331




319




301




1,288


Total operating expenses



3,483




3,774




3,933




3,768




14,958


Operating Income



2,377




2,495




2,633




2,412




9,917


Other income, net



47




163




124




92




426


Interest expense



(307)




(316)




(315)




(333)




(1,271)


Income before income taxes



2,117




2,342




2,442




2,171




9,072


Income taxes



(487)




(507)




(547)




(533)




(2,074)


Net Income


$

1,630



$

1,835



$

1,895



$

1,638



$

6,998























Share and Per Share





















Earnings per share - basic


$

2.58



$

2.93



$

3.05



$

2.67



$

11.24


Earnings per share - diluted


$

2.57



$

2.93



$

3.05



$

2.67



$

11.21


Weighted average number of shares - basic



632.2




625.6




620.4




612.7




622.7


Weighted average number of shares - diluted



633.6




626.8




621.5




613.7




624.0


Dividends declared per share


$

1.18



$

1.30



$

1.30



$

1.30



$

5.08























Operating Ratio



59.4

%



60.2

%



59.9

%



61.0

%



60.1

%

Effective Tax Rate



23.0

%



21.6

%



22.4

%



24.6

%



22.9

%

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Freight Revenues Statistics (unaudited)

 



2022



1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

Full Year


Freight Revenues (Millions)





















Grain & grain products


$

877



$

867



$

880



$

974



$

3,598


Fertilizer



180




183




178




171




712


Food & refrigerated



267




271




290




265




1,093


Coal & renewables



508




492




611




523




2,134


Bulk



1,832




1,813




1,959




1,933




7,537


Industrial chemicals & plastics



520




557




579




502




2,158


Metals & minerals



485




562




601




548




2,196


Forest products



364




386




390




325




1,465


Energy & specialized markets



552




586




624




624




2,386


Industrial



1,921




2,091




2,194




1,999




8,205


Automotive



501




561




601




594




2,257


Intermodal



1,186




1,377




1,355




1,242




5,160


Premium



1,687




1,938




1,956




1,836




7,417


Total


$

5,440



$

5,842



$

6,109




5,768




23,159


Revenue Carloads (Thousands)





















Grain & grain products



205




195




190




208




798


Fertilizer



45




53




51




41




190


Food & refrigerated



47




48




48




44




187


Coal & renewables



225




202




243




215




885


Bulk



522




498




532




508




2,060


Industrial chemicals & plastics



160




161




165




151




637


Metals & minerals



182




205




202




196




785


Forest products



64




63




62




52




241


Energy & specialized markets



131




141




140




140




552


Industrial



537




570




569




539




2,215


Automotive



190




192




198




198




778


Intermodal [a]



757




805




811




743




3,116


Premium



947




997




1,009




941




3,894


Total



2,006




2,065




2,110




1,988




8,169


Average Revenue per Car





















Grain & grain products


$

4,269



$

4,451



$

4,641



$

4,681



$

4,509


Fertilizer



4,016




3,437




3,504




4,167




3,749


Food & refrigerated



5,637




5,770




6,017




5,957




5,844


Coal & renewables



2,262




2,426




2,514




2,431




2,410


Bulk



3,508




3,642




3,685




3,799




3,658


Industrial chemicals & plastics



3,247




3,455




3,508




3,335




3,388


Metals & minerals



2,660




2,755




2,969




2,790




2,797


Forest products



5,672




6,128




6,347




6,264




6,092


Energy & specialized markets



4,219




4,161




4,434




4,459




4,320


Industrial



3,574




3,674




3,852




3,711




3,704


Automotive



2,640




2,919




3,030




3,007




2,902


Intermodal [a]



1,566




1,711




1,672




1,672




1,656


Premium



1,782




1,943




1,939




1,953




1,905


Average


$

2,711



$

2,830



$

2,895



$

2,902



$

2,835




[a]

For intermodal shipments each container or trailer equals one carload.

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Non-GAAP Measures Reconciliation to GAAP

 

Adjusted Debt / Adjusted EBITDA*









Millions, Except Ratios


Dec 31,



Dec 31,


For the Twelve Months Ended


2022



2021


Net income


$

6,998



$

6,523


Add:









Income tax expense



2,074




1,955


Depreciation



2,246




2,208


Interest expense



1,271




1,157


EBITDA


$

12,589



$

11,843


Adjustments:









Other income, net



(426)




(297)


Interest on operating lease liabilities**



54




56


Adjusted EBITDA


$

12,217



$

11,602


Debt


$

33,326



$

29,729


Operating lease liabilities



1,631




1,759


Unfunded pension and OPEB, net of tax cost of $0 and $0 [a]



-




-


Adjusted debt


$

34,957



$

31,488


Adjusted debt / adjusted EBITDA



2.9




2.7



Comparable Adjusted Debt / Adjusted EBITDA*











Dec 31,



Dec 31,




2022



2021


Adjusted debt / Adjusted EBITDA



2.9




2.7


Factors Affecting Comparability:









Labor accrual adjustment [b]



(0.1)




N/A


Comparable adjusted debt / adjusted EBITDA*



2.8




2.7




[a]

Prior periods were recast to conform to the current year presentation, which removes the impact of pension and OPEB when the net amount represents a funded amount.

[b]

Adjustments remove the impact of $69 million from net income and $23 million from income tax expense for the year ended December 31, 2022. See page 10 for a reconciliation to GAAP.



*

Total debt plus operating lease liabilities plus after-tax unfunded pension and other postretirement benefit (OPEB) liabilities divided by net income plus income tax expense, depreciation, amortization, interest expense, and adjustments for other income and interest on operating lease liabilities. Adjusted debt to adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, and adjustments for other income and interest on operating lease liabilities) and comparable adjusted debt to adjusted EBITDA are considered a non-GAAP financial measure by SEC Regulation G and Item 10 of SEC Regulation S-K and may not be defined and calculated by other companies in the same manner. We believe these measures are important to management and investors in evaluating the Company's ability to sustain given debt levels (including leases) with the cash generated from operations. In addition, a comparable measure is used by rating agencies when reviewing the Company's credit rating. Adjusted debt to adjusted EBITDA and comparable adjusted debt to adjusted EBITDA should be considered in addition to, rather than as a substitute for, net income. The tables above provide a reconciliation from net income to adjusted EBITDA, debt to adjusted debt, and adjusted debt to adjusted EBITDA to comparable adjusted debt to adjusted EBITDA. At December 31, 2022 and 2021, the incremental borrowing rate on operating lease liabilities was 3.3% and 3.2%, respectively.



**

Represents the hypothetical interest expense we would incur (using the incremental borrowing rate) if the property under our operating leases were owned or accounted for as finance leases.

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Non-GAAP Measures Reconciliation to GAAP

 

Return on Average Common Shareholders' Equity









Millions, Except Percentages


2022



2021


Net income


$

6,998



$

6,523


Average equity


$

13,162



$

15,560


Return on average common shareholders' equity



53.2

%



41.9

%


Return on Invested Capital as Adjusted (ROIC)*









Millions, Except Percentages


2022



2021


Net income


$

6,998



$

6,523


Interest expense



1,271




1,157


Interest on average operating lease liabilities



56




54


Taxes on interest



(304)




(280)


Net operating profit after taxes as adjusted


$

8,021



$

7,454


Average equity


$

13,162



$

15,560


Average debt



31,528




28,229


Average operating lease liabilities



1,695




1,682


Average invested capital as adjusted


$

46,385



$

45,471


Return on invested capital as adjusted



17.3

%



16.4

%

Comparable Return on Invested Capital as Adjusted (Comparable ROIC)*




2022



2021


Return on invested capital as adjusted



17.3

%



16.4

%

Factors Affecting Comparability:









Labor accrual adjustment [a]



0.1




N/A


Comparable return on invested capital as adjusted



17.4

%



16.4

%



[a]

Adjustments remove the impact of $69 million from both net income for the year ended and shareholders' equity as of December 31, 2022. See page 10 for a reconciliation to GAAP.



*

ROIC and comparable ROIC are considered non-GAAP financial measures by SEC Regulation G and Item 10 of SEC Regulation S-K and may not be defined and calculated by other companies in the same manner. We believe these measures are important to management and investors in evaluating the efficiency and effectiveness of our long-term capital investments. In addition, we currently use ROIC as a performance criterion in determining certain elements of equity compensation for our executives. ROIC and comparable ROIC should be considered in addition to, rather than as a substitute for, other information provided in accordance with GAAP. The most comparable GAAP measure is return on average common shareholders' equity. The tables above provide reconciliations from return on average common shareholders' equity to ROIC and comparable ROIC. At December 31, 2022 and 2021, the incremental borrowing rate on operating lease liabilities was 3.3% and 3.2%, respectively.

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
Non-GAAP Measures Reconciliation to GAAP 


Financial Performance*


Reported results

Labor accrual

Adjusted results


Millions, Except Per Share Amounts and Percentages



(GAAP)




adjustment





(non-GAAP)


For the Twelve Months Ended December 31, 2022












Compensation and benefits expense


$

4,645



$

(92)




$

4,553


Operating expense



14,958




(92)





14,866


Operating income



9,917




92





10,009


Income taxes



(2,074)




(23)





(2,097)


Net income



6,998




69





7,067


Diluted EPS



11.21




0.12





11.33


Operating ratio



60.1

%



(0.3)


pts



59.8

%

As of December 31, 2022














Shareholders' equity


$

12,163



$

69




$

12,232




*

The above table reconciles our results for the twelve months ended and as of December 31, 2022, to adjust results that exclude the impact of certain items identified as affecting comparability. We use adjusted compensation and benefits expense, adjusted operating expense, adjusted operating income, adjusted income taxes, adjusted net income, adjusted diluted earnings per share (EPS), adjusted operating ratio, and adjusted shareholders' equity, as applicable, among other measures, to evaluate our actual operating performance. We believe these non-GAAP financial measures provide valuable information regarding earnings and business trends by excluding specific items that we believe are not indicative of our ongoing operating results of our business, providing a useful way for investors to make a comparison of our performance over time and against other companies in our industry. Since these are not measures of performance calculated in accordance with GAAP, they should be considered in addition to, rather than as a substitute for, compensation and benefits expense, operating expense, operating income, income taxes, net income, diluted EPS, operating ratio, and shareholders' equity as indicators of operating performance.

 

View original content to download multimedia:https://www.prnewswire.com/news-releases/union-pacific-reports-fourth-quarter-and-full-year-2022-results-301728715.html

SOURCE Union Pacific Corporation

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Schedule for Week of January 29, 2023

The key reports scheduled for this week are the January employment report and November Case-Shiller house prices.Other key indicators include January ISM manufacturing and services surveys, and January vehicle sales.The FOMC meets this week, and the FO…

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The key reports scheduled for this week are the January employment report and November Case-Shiller house prices.

Other key indicators include January ISM manufacturing and services surveys, and January vehicle sales.

The FOMC meets this week, and the FOMC is expected to announce a 25 bp hike in the Fed Funds rate.

----- Monday, January 30th -----

10:30 AM: Dallas Fed Survey of Manufacturing Activity for January. This is the last of the regional Fed manufacturing surveys for January.

----- Tuesday, January 31st -----

9:00 AM: FHFA House Price Index for November. This was originally a GSE only repeat sales, however there is also an expanded index.

9:00 AM ET: S&P/Case-Shiller House Price Index for November.

This graph shows the Year over year change in the nominal seasonally adjusted National Index, Composite 10 and Composite 20 indexes through the most recent report (the Composite 20 was started in January 2000).

The consensus is for a 6.9% year-over-year increase in the Comp 20 index.

9:45 AM: Chicago Purchasing Managers Index for January. The consensus is for a reading of 44.9, down from 45.1 in December.

10:00 AM: The Q4 Housing Vacancies and Homeownership report from the Census Bureau.

----- Wednesday, February 1st -----

7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:15 AM: The ADP Employment Report for January. This report is for private payrolls only (no government). The consensus is for 170,000 payroll jobs added in January, down from 235,000 added in December.

10:00 AM: Construction Spending for December. The consensus is for a 0.1% decrease in construction spending.

Job Openings and Labor Turnover Survey10:00 AM ET: Job Openings and Labor Turnover Survey for December from the BLS.

This graph shows job openings (black line), hires (purple), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

Job openings decreased in November to 10.458 million from 10.512 million in October

10:00 AM: ISM Manufacturing Index for January. The consensus is for the ISM to be at 48.0, down from 48.4 in December.

2:00 PM: FOMC Meeting Announcement. The FOMC is expected to announce a 25 bp hike in the Fed Funds rate.

2:30 PM: Fed Chair Jerome Powell holds a press briefing following the FOMC announcement.

Vehicle SalesAll day: Light vehicle sales for January. The consensus is for light vehicle sales to be 14.3 million SAAR in January, up from 13.3 million in December (Seasonally Adjusted Annual Rate).

This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the December sales rate.

----- Thursday, February 2nd -----

8:30 AM: The initial weekly unemployment claims report will be released.  The consensus is for 200 thousand initial claims, up from 186 thousand last week.
----- Friday, February 3rd -----

Employment Recessions, Scariest Job Chart8:30 AM: Employment Report for December.   The consensus is for 185,000 jobs added, and for the unemployment rate to increase to 3.6%.

There were 223,000 jobs added in December, and the unemployment rate was at 3.5%.

This graph shows the job losses from the start of the employment recession, in percentage terms.

The pandemic employment recession was by far the worst recession since WWII in percentage terms. However, as of August 2022, the total number of jobs had returned and are now 1.24 million above pre-pandemic levels.

10:00 AM: ISM Manufacturing Index for January. The consensus is for the ISM to be at 50.3, up from 49.6 in December.

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US gov’t $1.5T debt interest will be equal 3X Bitcoin market cap in 2023

The U.S. will pay over $1 trillion in debt interest next year, the equivalent of three or more Bitcoin market caps at current prices.

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The U.S. will pay over $1 trillion in debt interest next year, the equivalent of three or more Bitcoin market caps at current prices.

Commentators believe that Bitcoin (BTC) bulls do not need to wait long for the United States to start printing money again.

The latest analysis of U.S. macroeconomic data has led one market strategist to predict quantitative tightening (QT) ending to avoid a “catastrophic debt crisis.”

Analyst: Fed will have “no choice” with rate cuts

The U.S. Federal Reserve continues to remove liquidity from the financial system to fight inflation, reversing years of COVID-19-era money printing.

While interest rate hikes look set to continue declining in scope, some now believe that the Fed will soon have only one option — to halt the process altogether.

“Why the Fed will have no choice but to cut or risk a catastrophic debt crisis,” Sven Henrich, founder of NorthmanTrader, summarized on Jan. 27.

“Higher for longer is a fantasy not rooted in math reality.”

Henrich uploaded a chart showing interest payments on current U.S. government expenditure, now hurtling toward $1 trillion a year.

A dizzying number, the interest comes from U.S. government debt being over $31 trillion, with the Fed printing trillions of dollars since March 2020. Since then, interest payments have increased by 42%, Henrich noted.

The phenomenon has not gone unnoticed elsewhere in crypto circles. Popular Twitter account Wall Street Silver compared the interest payments as a portion of U.S. tax revenue.

“US paid $853 Billion in Interest for $31 Trillion Debt in 2022; More than Defense Budget in 2023. If the Fed keeps rates at these levels (or higher) we will be at $1.2 trillion to $1.5 trillion in interest paid on the debt,” it wrote.

“The US govt collects about $4.9 trillion in taxes.”
Interest rates on U.S. government debt chart (screenshot). Source: Wall Street Silver/ Twitter

Such a scenario might be music to the ears of those with significant Bitcoin exposure. Periods of “easy” liquidity have corresponded with increased appetite for risk assets across the mainstream investment world.

The Fed’s unwinding of that policy accompanied Bitcoin’s 2022 bear market, and a “pivot” in interest rate hikes is thus seen by many as the first sign of the “good” times returning.

Crypto pain before pleasure?

Not everyone, however, agrees that the impact on risk assets, including crypto, will be all-out positive prior to that.

Related: Bitcoin ‘so bullish’ at $23K as analyst reveals new BTC price metrics

As Cointelegraph reported, ex-BitMEX CEO Arthur Hayes believes that chaos will come first, tanking Bitcoin and altcoins to new lows before any sort of long-term renaissance kicks in.

If the Fed faces a complete lack of options to avoid a meltdown, Hayes believes that the damage will have already been done before QT gives way to quantitative easing.

“This scenario is less ideal because it would mean that everyone who is buying risky assets now would be in store for massive drawdowns in performance. 2023 could be just as bad as 2022 until the Fed pivots,” he wrote in a blog post this month.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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Stay Ahead of GDP: 3 Charts to Become a Smarter Trader

When concerns of a recession are front and center, investors tend to pay more attention to the Gross Domestic Product (GDP) report. The Q4 2022 GDP report…

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When concerns of a recession are front and center, investors tend to pay more attention to the Gross Domestic Product (GDP) report. The Q4 2022 GDP report showed the U.S. economy grew by 2.9% in the quarter, and Wall Street wasn't disappointed. The day the report was released, the market closed higher, with the Dow Jones Industrial Average ($DJIA) up 0.61%, the S&P 500 index ($SPX) up 1.1%, and the Nasdaq Composite ($COMPQ) up 1.76%. Consumer Discretionary, Technology, and Energy were the top-performing S&P sectors.

Add to the GDP report strong earnings from Tesla, Inc. (TSLA) and a mega announcement from Chevron Corp. (CVX)—raising dividends and a $75 billion buyback round—and you get a strong day in the stock markets.

Why is the GDP Report Important?

If a country's GDP is growing faster than expected, it could be a positive indication of economic strength. It means that consumer spending, business investment, and exports, among other factors, are going strong. But the GDP is just one indicator, and one indicator doesn't necessarily tell the whole story. It's a good idea to look at other indicators, such as the unemployment rate, inflation, and consumer sentiment, before making a conclusion.

Inflation appears to be cooling, but the labor market continues to be strong. The Fed has stated in many of its previous meetings that it'll be closely watching the labor market. So that'll be a sticky point as we get close to the next Fed meeting. Consumer spending is also strong, according to the GDP report. But that could have been because of increased auto sales and spending on services such as health care, personal care, and utilities. Retail sales released earlier in January indicated that holiday sales were lower.

There's a chance we could see retail sales slowing in Q1 2023 as some households run out of savings that were accumulated during the pandemic. This is something to keep an eye on going forward, as a slowdown in retail sales could mean increases in inventories. And this is something that could decrease economic activity.

Overall, the recent GDP report indicates the U.S. economy is strong, although some economists feel we'll probably see some downside in 2023, though not a recession. But the one drawback of the GDP report is that it's lagging. It comes out after the fact. Wouldn't it be great if you had known this ahead of time so you could position your trades to take advantage of the rally? While there's no way to know with 100% accuracy, there are ways to identify probable events.

3 Ways To Stay Ahead of the Curve

Instead of waiting for three months to get next quarter's GDP report, you can gauge the potential strength or weakness of the overall U.S. economy. Steven Sears, in his book The Indomitable Investor, suggested looking at these charts:

  • Copper prices
  • High-yield corporate bonds
  • Small-cap stocks

Copper: An Economic Indicator

You may not hear much about copper, but it's used in the manufacture of several goods and in construction. Given that manufacturing and construction make up a big chunk of economic activity, the red metal is more important than you may have thought. If you look at the chart of copper futures ($COPPER) you'll see that, in October 2022, the price of copper was trading sideways, but, in November, its price rose and trended quite a bit higher. This would have been an indication of a strengthening economy.

CHART 1: COPPER CONTINUOUS FUTURES CONTRACTS. Copper prices have been rising since November 2022. Chart source: StockCharts.com. For illustrative purposes only.

High-Yield Bonds: Risk On Indicator

The higher the risk, the higher the yield. That's the premise behind high-yield bonds. In short, companies that are leveraged, smaller, or just starting to grow may not have the solid balance sheets that more established companies are likely to have. If the economy slows down, investors are likely to sell the high-yield bonds and pick up the safer U.S. Treasury bonds.

Why the flight to safety? It's because when the economy is sluggish, the companies that issue the high-yield bonds tend to find it difficult to service their debts. When the economy is expanding, the opposite happens—they tend to perform better.

The chart below of the Dow Jones Corporate Bond Index ($DJCB) shows that, since the end of October 2022, the index trended higher. Similar to copper prices, high-yield corporate bond activity was also indicating economic expansion. You'll see similar action in charts of high-yield bond exchange-traded funds (ETFs) such as iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and SPDR Barclays High Yield Bond ETF (JNK).

CHART 2: HIGH-YIELD BONDS TRENDING HIGHER. The Dow Jones Corporate Bond Index ($DJCB) has been trending higher since end of October 2022.Chart source: StockCharts.com. For illustrative purposes only.

Small-Cap Stocks: They're Sensitive

Pull up a chart of the iShares Russell 2000 ETF (IWM) and you'll see similar price action (see chart 3). Since mid-October, small-cap stocks (the Russell 2000 index is made up of 2000 small companies) have been moving higher.

CHART 3: SMALL-CAP STOCKS TRENDING HIGHER. When the economy is expanding, small-cap stocks trend higher.Chart source: StockCharts.com. For illustrative purposes only.

Three's Company

If all three of these indicators are showing strength, you can expect the GDP number to be strong. There are times when the GDP number may not impact the markets, but, when inflation is a problem and the Fed is trying to curb it by raising interest rates, the GDP number tends to impact the markets.

This scenario is likely to play out in 2023, so it would be worth your while to set up a GDP Tracker ChartList. Want a live link to the charts used in this article? They're all right here.


Jayanthi Gopalakrishnan

Director, Site Content

StockCharts.com

 

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

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