With profits where they are and Union Pacific doing as well as it is, what is the management's excuse for layoffs? Is there even one?
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The large institutional investors aren’t happy with consistently great money being made over the long term at a steady rate. They want more money right now. Slash costs, get a wad of cash fast, then leave a shell of a company once they’ve feasted off us. Management has no choice. Do it or get canned by shareholders that can easily buy controlling shares and oust the board and execs and put their own hatchet men in. Greed. Two bit pirates and greenmailers, as they say in the movie Wall Street.
This "change" was inevitable. As previously said, op costs went up, because you have mgmt turf wars, micromanaging the wrong number, creating more costs. We all know what those numbers are because they beat it into our skulls. Poor and weak management has led up down this path.
Help Union Pacific achieve its 60 percent operating ratio goal by 2020, on the way to achieving a 55 percent operating ratio.
The operating profit ratio target is 60%. It means 60% of the net revenue would be used to cover cost of operating expenses. Non-operating expenses such as interest charges, taxes etc., are excluded from the computations.
Union Pacific’s high operating expenses are concerning. Operating costs have increased 8% in the first nine months of 2018, mainly due to a 41% rise in fuel-related expenses.
Declining coal volumes due to pricing pressures might hurt the company’s fourth-quarter results. The company stated that fourth-quarter volumes at the energy and agricultural segments dropped 10% and 4%, respectively, as of Nov 25.
Debt/EBITDA ratio (adjusted) at Union Pacific is anticipated to increase to up to 2.7 in 2020. The ratio was 1.9 in 2017. A high Debt/EBITDA ratio often indicates that a company might be unable to service its debt appropriately. Among other things they borrow all that money for stock buy backs so it doesn’t show as operating expense all at once.
The price-to-book ratio, or P/B ratio, often used to value railroads, is a financial ratio used to compare a company's current market price to its book value. The company currently has a trailing 12-month P/B ratio of 4.9 compared with the industry’s average of 4.3.
Union Pacific spends 50 - 65% more than other major railroads such as Canadian National Railway, CSX, and Norfolk Southern as a result of the need to maintain a greater number of track-related miles.
Record profit doesn’t necessarily mean you have improved operating expenses.
Solution: warehouse excessive unprofitable assets that otherwise need continual maintenance and, manage controllable costs like human capital. Operating cost must be brought into line to remain competitive for investment or the sum of your parts become more valuable than your whole in time.
That is the excuse!
The excuse is to make more shareholder value. This company is not a family friendly place and never has been to anyone outside HQ. Its just now that HQ employees fi ally deal with field problems that have been the norm for years.
Ya they make more money is getting cut