Thread regarding Union Pacific Corp. layoffs

Wall Street starting to get reality

Excerpt today from A Wall Street Analyst today

Manpower UPRR
Compensation and benefits expense was $1.0 billion, down 18% Y/Y. At 34% of total operating costs, compensation and benefits was Union Pacific's largest expense item. The company has been reducing headcountto combat the decline in its top line:
Starting with compensation and benefits expense, this category decreased 18% to $1 billion driven by a 17% workforce reduction or about 7100 FTEs versus 2018.
Our productivity initiatives, coupled with lower volumes resulted in a 20% decrease in our train and engine workforce, while management, engineering and mechanical workforces together decreased 16%.
More headcount reductions likely lie ahead. Of note is that fuel costs fell 20% and purchased services declined 9%. The fallout was that EBITDA of $2.7 billion fell 4% Y/Y, less than the decline in revenue. EBITDA margin has ticked up 300 basis points versus the year-earlier period. Can management continue to cut costs faster than declines in revenue? It appears Union Pacific may be trying to fight gravity.

The Stock Is Overvalued
Financial markets have melted up from tax cuts and easy money policies from the Federal Reserve. The rise in broader markets has inured to the benefit of UNP. The company has an enterprise value of $150 billion and trades at 13.9x run-rate EBITDA (nine months EBITDA annualized). In my opinion, the valuation is too robust for a company subjected to the vagaries of a global economy that has likely peaked.
Conclusion
UNP is up over 25% Y/Y, yet the stock remains overvalued. Sell UNP.

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Post ID: @OP+13pYF0rh

9 replies (most recent on top)

I forgot to put is after reality, so it should say reality is those companies have moved away etc

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Post ID: @2ghi+13pYF0rh

@1pph+13pYF0rh Are you really that literal or just a little slow on the uptake?

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Post ID: @2epc+13pYF0rh

It’s a pump and dump - “PSR”, cuts, and borrowing to buy back stock - 3 ways to pump the stock up, so short term institutional investors make a fast buck, take their money, and run. The shell of a company will then rebuild by undoing the “PSR” experiment, apologizing to customers while blaming “the market”, replacing leaders who bailed out with their golden parachutes, hiring less than great people because their reputation is in the toilet, and slowly paying back all that debt....

Classic scenario, right out of the manual. If you think graduates of the best business schools now on Wall Street and the boomers who learned about the levered buyouts and mergers of the 80s didn’t orchestrate this all with precision, then I have some Enron stock to sell you.

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Post ID: @1lcw+13pYF0rh

It doesn’t matter if anyone cares. Just that they realize UP is a fraud. That 24 billion dollar debt has got to be paid. Can’t borrow and inflate the stock forever.

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Post ID: @1ugd+13pYF0rh

Ok reality about what? They're still happy with s—ing the life out of the UP. Please fill us in about what reality your talking about

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Post ID: @1ixn+13pYF0rh

Ok do you think that Wall st. even gives a sh–? That article said nothing about what the investors are thinking. It was nothing more than an opinion but an editor that doesn't even hold UP stock.

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Post ID: @1bon+13pYF0rh

Both of the post below have No idea what a venture capitalist is, which in turn discredits your whole argument.

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Post ID: @vyi+13pYF0rh

It should have never been a question of who stood to gain from the current majority stockholders(venture capitalists short term holders)/glass palace management team vs customers/employees plan that has been established (PSR). This whole time it has been about the money and how much can be squeezed out before the hemorrhaging is noticeable and to late to stop without a total culture and management overhaul which is exactly what will need to be done to get the company back to where it needs too be. There are people here that will disagree and say PSR works (or that we are not doing PSR 100%) and that those companies that used it before are still utilizing its principles (csx is still using it apparently but looks to be easing up and possibly will go back to actually taking care of it’s customers and employees) but reality those other companies have moved away from the principles of PSR and focused back on their customers and employees.

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Post ID: @ojz+13pYF0rh

The problem is this has been being said for almost a year and it hasn't happen. Investors are somehow ok with making less money. Stock price is up and that's all the venture capitalists care about. The dividend is down and that hurts the long term investor. And we know who they are catering too.

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Post ID: @cfa+13pYF0rh

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