Exchange: LSE | Sector: Industrials | Industry: General Transportation
Q4 2024
Published: Feb 7, 2025
Earnings Highlights
Revenue of $6.12B down 0.6% year-over-year
EPS of $2.91 increased by 7.8% from previous year
Gross margin of 45.8%
Net income of 1.76B
"N/A" - N/A
Union Pacific Corporation (0R2E.L) QQ4 2024 Results: Revenue Stabilization with Margin Expansion and Robust Free Cash Flow Generation
Executive Summary
Union Pacific reported solid profitability in Q4 2024, underpinned by strong operating discipline and robust cash generation despite revenue slightly lagging year-ago levels. Revenue of $6.121 billion declined ~0.6% YoY, while net income rose ~6.7% YoY to $1.762 billion and diluted EPS reached $2.91-$2.92, up about 6–8% YoY. Operating margin remained strong at ~41.3%, supported by a robust EBITDA of $3.199 billion (EBITDA margin ~52%). Free cash flow generation was meaningful at approximately $1.74 billion for the quarter, with operating cash flow of $2.662 billion and capital investments of $0.922 billion, highlighting ongoing capital discipline. The company continued to allocate capital to shareholder returns, with $810 million in dividends and $674 million in share repurchases, while net debt remained elevated at roughly $31.45 billion, indicating a leverage profile that remains supportive but sensitive to cycle dynamics.
Looking at liquidity and balance sheet health, Union Pacific exhibits strong cash flow generation and solid coverage metrics (interest coverage ~8.0x). However, leverage is high (total debt ~ $32.46B; debt-to-capitalization ~0.658), consistent with a large, capital-intensive rail operator. Operationally, key efficiency indicators such as receivables turnover (~3.23x) and inventory turnover (~4.33x) suggest disciplined working capital management, while asset turnover remains modest (0.089x) given the scale of fixed assets. The narrative suggests management’s continued emphasis on capital allocation (dividends and buybacks) and network reliability, with a focus on sustaining margins amid a cyclical freight environment. The QQ4 2024 results are generally favorable relative to a volatile macro backdrop, though the stock is priced with elevated multiples by traditional value metrics.
Cash Flow and capital allocation
- Operating Cash Flow: $2.662B; Free Cash Flow (FCF): $1.74B
- Capital Expenditures: $(0.922)B
- Dividends Paid: $(0.810)B; Stock Repurchases: $(0.674)B
- Net Change in Cash (quarter): $71.0M; Cash at end of period: $1.016B
- Net Income: $1.762B; Interest Expense: $0.312B; Depreciation & Amortization: $0.606B
Balance sheet and leverage
- Total Assets: $67.715B; Total Liabilities: $50.825B; Total Equity: $16.890B
- Total Debt: $32.463B; Net Debt: $31.447B
- Current Ratio: 0.765; Quick Ratio: 0.619; Cash & Equivalents: $1.016B
- Debt to Capitalization: 0.658; Debt to Equity: 1.922; Interest Coverage: 8.04x
Profitability and efficiency
- Gross Margin: 45.84%; Operating Margin: 41.25%; Net Margin: 28.79%
- Return on Assets (ROA): 2.57%; Return on Equity (ROE): 10.4%; Return on Capital Employed (ROCE): 3.97%
- Revenue/Asset Turnover: 0.0894x; Fixed Asset Turnover: 0.103x; Receivables Turnover: 3.23x; Inventory Turnover: 4.33x
Valuation context (as of QQ4 2024 data)
- Price/Earnings: ~19.5x; Price/Book: ~8.14x; Price to Sales: ~22.45x; Dividend Yield: ~0.59%
- Free Cash Flow per Share: $2.88; Operating Cash Flow per Share: $4.41; Payout Ratio: ~46%
- Enterprise Value Multiples provided: ~52.52x (context dependent); Cash/FCF metrics imply a high-beta, asset-light narrative in a capital-intensive rail operator.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
6.12B
-0.62%
0.49%
Gross Profit
2.81B
1.37%
1.30%
Operating Income
2.53B
4.90%
4.82%
Net Income
1.76B
6.66%
5.45%
EPS
2.92
7.75%
6.18%
Key Financial Ratios
currentRatio
0.77
grossProfitMargin
45.6%
operatingProfitMargin
41%
netProfitMargin
28.8%
returnOnAssets
2.57%
returnOnEquity
10.4%
debtEquityRatio
1.92
operatingCashFlowPerShare
$4.41
freeCashFlowPerShare
$2.88
dividendPayoutRatio
46%
priceToBookRatio
8.14
priceEarningsRatio
19.5
Net Income vs. Revenue
Expense Breakdown
Management Commentary
No earnings call transcript was provided in the data set. Consequently, management quotes or direct transcript-based themes cannot be cited or grouped. If a transcript is made available, I can extract key insights by themes (strategy, operations, market conditions) and pair them with the quantitative results above.
N/A
— N/A
N/A
— N/A
Forward Guidance
No explicit forward guidance was disclosed for QQ4 2024 in the provided data. In the absence of formal targets, the forward view hinges on: (1) continued cash flow durability from core freight activity and pricing discipline; (2) capital allocation stance balanced between sustaining the network (capex) and shareholder returns (dividends and buybacks); (3) macro freight demand trends affecting volume and intermodal mix; (4) inflationary/deflationary pressures on operating costs (fuel, labor, maintenance). Based on historical margins (operating margin ~41%) and strong FCF generation, a conservative scenario implies steady-state or modest revenue stabilization with continued margin retention, assuming no material volume shock. Key factors for investors to monitor: intermodal and agricultural volumes, pricing power in a competitive rate environment, fuel costs and labor expenses, and the pace of debt reduction or refinancing plans that could influence leverage metrics.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
0R2E.L Focus
45.84%
41.00%
10.40%
19.50%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Union Pacific enters 2025 with durable profitability and strong cash generation, highlighted by a robust operating margin and meaningful free cash flow. The upside rests on continued volume stability, strength in intermodal and agricultural shipments, and execution of cost-reduction initiatives that preserve margin discipline. Valuation remains elevated on traditional metrics (P/E around 19.5x, P/B ~8.14x), reflecting the quality of cash flows and the scale of the franchise, but this also implies a limited margin of safety amid potential macro shocks. Given the debt load and sensitivity to cycle dynamics, the stock may suit investors who prioritize dividend income and long-term capital appreciation from a high-quality rail operator, while remaining mindful of leverage risk and potential volatility in rail volumes. Close monitoring of management’s cadence on debt reduction, capex efficiency, and any shift in market demand (intermodal growth, energy sector shipments) will be essential for updating the investment thesis.
Key Investment Factors
Growth Potential
Scale advantages from an extensive North American rail network; potential for volume growth in intermodal and agricultural segments; pricing power within regulated freight tariffs; ongoing efficiency programs to improve utilization of assets and reliability.
Profitability Risk
Cyclicality of freight volumes and macro demand; high absolute debt levels and leverage sensitivity to earnings volatility; regulatory and labor risk; capital-intensive asset base; exposure to fuel price fluctuations and supply chain disruptions.
Financial Position
Strong free cash flow generation supports shareholder returns and financial flexibility, but elevated net debt (~$31.45B) and leverage metrics (Debt/Capitalization ~0.658) necessitate ongoing discipline in capex and financing choices. Solid coverage (interest coverage ~8x) provides cushion in downturns.
SWOT Analysis
Strengths
Large, nationwide rail network with corridor breadth and intermodal capabilities