Union Pacific reported above forecast fourth-quarter results early Thursday, while peer CSX reported its fourth quarter after the close, as the Covid-19 omicron variant threatens global supply chains afresh.
Union Pacific stock rose Thursday. CSX stock ended the session effectively flat, then dropped sharply in afterhours trade, following its earnings report.
Late last year and into 2022, rail stocks had been strong performers. But the omicron Covid variant and the broad market sell-off have taken their toll.
Union Pacific Earnings
Estimates: Analysts on average expected Union Pacific earnings to rise 10.5% from a year ago to $2.61 per share. Q4 revenue was seen growing nearly 9% to $5.601 billion, according to FactSet. Both earnings and sales growth were seen slowing for a second straight quarter.
Analysts projected the rail line's Q4 carloads would drop 0.3%, but revenue per carload would rise 9%. Last October, Union Pacific cut its full-year volume target from 7% to 5%.
Results: The Omaha-based operator reported diluted earnings per shares of $2.66, a year-over-year gain of 12.7%, according to FactSet. Total operating revenue rose 11.5% to $5.733 billion.
Union Pacific Stock
Shares rose 1.8% to 246.33 on the stock market today, retaking support at the stock's 50-day moving average in three-day advance.
On Jan. 19, Union Pacific announced it will become the primary intermodal rail provider in the Western U.S. to Green Bay, Wis.-based Schneider, starting in January 2023. It reportedly won the business from BNSF, a Berkshire Hathaway rail unit. It's a key win for UNP as it looks to grow its rail intermodal business. Rail intermodal refers to the transportation of shipping containers and truck trailers by rail, reducing costs for customers.
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CSX Earnings
Estimates: Wall Street forecasts CSX earnings to grow 19.5% to 41 cents per share. Q4 revenue is seen rising 19.8% to $3.324 billion, according to FactSet. For CSX, too, both earnings and sales growth are seen slowing for a second consecutive quarter amid falling freight volumes.
Results: Earnings per share increased 20% to 42 cents per share, narrowly outpacing expectations. Revenue popped 23.6% to $3.427 billion. Labor and 'fringe' costs rose almost 20% during the quarter. Fuel costs surged 103%. Freight volumes decreased 2%, but generated a 27% increase in revenue.
CSX Stock
Shares closed down 3.2% at 34.10 on Friday. CSX stock undercut its 50-day line in big volume Tuesday.
Rail stocks face a mix of headwinds and tailwinds.
Like most major North American railroads, CSX has invested heavily to implement Precision Scheduled Railroading (PSR), a strategy to drive down costs and improve efficiencies. That has broadly helped to improve profitability and shake kinks out of supply chains. But because it also trims the number of rail workers required, it has also caused rising conflict with labor unions.
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Meanwhile, the Covid-19 delta variant has weighed on CSX stock, and earnings, as well as the broader rail sector's recovery, along with other supply-chain disruptions. Now the omicron variant is spreading in China, the U.S. and across the world, a fresh headache.
Meanwhile, Canadian Pacific Railway's $31 billion purchase of Kansas City Southern, which closed in December, promises to escalate competition in the North America rail network.
Find Aparna Narayanan on Twitter at @IBD_Aparna.
