Published on 7 Oct 2021 on Zacks via Yahoo Finance
It is a well-known fact that freight revenues have improved from the 2020 levels this year so far with gradual recovery in economic activities. This is a welcome development for the railroads as freight revenues comprise the bulk of their top lines. Evidently, at Union Pacific Corporation UNP, second-quarter 2021 freight revenues improved 29% year over year.
However, the spread of the highly contagious Delta variant of COVID-19 in the United States proved to be a dampener and is threatening to derail the economic growth trend witnessed since the start of the year. This naturally affected freight revenues. Due to the Delta variant-induced supply-chain woes, shipment volumes declined 4.2% and 3.1% month over month in June and July, respectively.
Also, per data released by the Association of American Railroads, U.S. rail traffic (including carloads and intermodal units) has dipped year over year in each of the past three weeks (week ended Sep 18, Sep 25 and Oct 2). Mainly, due to the above-mentioned headwinds, shares of Union Pacific, currently carrying a Zacks Rank #4 (Sell), have declined 2.7% in the past three months against its industry’s 2.3% rise in the period.