Tag Archive for corporate transparency

Forecasting next months 2nd quarter rail earnings — Try doing this for government owned rail companies

Here is an example of an average analyst making 2nd QUARTER PROJECTIONS OF PRIVATE INVESTOR HELD RAILWAY FINANCIALS in the case of Union Pacific.

Only in North America is there such transparency.  Well, maybe in a few other places. But not many.

In this case, an analysis like Michael Hooper is reporting seeing massive declines in certain categories of US railroad freight, especially coal.  So he asks, what is the likely report by union Pacific going to look like to an investor about 30 days from now?

He begins by observing that UNP’s coal volumes are down ~ 28% Q2 to date. Grain is down 21% in the quarter, crushed stone and gravel down 14%; petroleum  down 6%. The only gainers so far this quarter are primary forest products, up 7%; chemicals up 1%; motor vehicles up 9%; waste up 3%… to name a few.

ESTIMATED FINANCIAL RESULTS:

If an assumption allows for an overall 2% pricing adjustment from a year ago; and if trends remain the same for the rest of June; then Union Pacific’s revenues will likely be down about 4%. His calculation.

Under that set of assumptions, UNP’s revenues in Q2 might decline by about $240 million. In turn, that might calculate to $5.76 billion of second quarter revenues –, slightly less than the average Wall Street analysts’ estimates.

But the rail company net profit margin may be the same at about 21.% for the 2nd quarter. Why?  Because UNP management is cutting variable costs.

Using this process, Michael then calculates the expected earnings per stock share.  Lot of maybes. But interesting to see how almost any analysts can see transparently the likely rail corporate income statement future outcomes.  By accessing public data.

Try doing that in South Africa, Senegal, Mongolia, or many other places were the citizens are the shareholders in the railroads. Cannot be done there with the government monopoly railways. Way too secretive in most of those organizations. In many, you might see the results about a year after they occurred.

For more about Michael’s analysis technique, go to:

Michael Hooper, “Thoughtful Investor”

http://seekingalpha.com/article/3267845-more-challenges-ahead-for-union-pacific?app=1&auth_param=d2tlu:1ao5rqo:01b158bda2f79aca644b2bfde5abe058&uprof=44