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Omaha, Nebraska-based Union Pacific Corporation (UNP), through its subsidiary, Union Pacific Railroad Company, operates in the railroad business. Valued at $149.2 billion by market cap, it connects 23 states in the western two-thirds of the U.S. by rail, providing a critical link in the global supply chain, hauling a variety of goods, including agricultural, automotive, and chemical products.
Shares of this leading class 1 railroad company have underperformed the broader market considerably over the past year. UNP has gained 8.9% over this time frame, while the broader S&P 500 Index ($SPX) has rallied nearly 26.1%. In 2024, UNP stock is down marginally, while SPX is up 16.5% on a YTD basis.
Narrowing the focus, UNP’s outperformance is apparent compared to the iShares U.S. Transportation ETF (IYT). The exchange-traded fund has gained about 5.2% over the past year. However, the ETF’s marginal decline on a YTD basis outshines the stock’s losses over the same time frame.
UNP’s overall performance can be attributed to its delay in implementing promised schedule improvements for train crews, which were intended to address quality-of-life concerns. The company has encountered reduced productivity and increased staffing needs under the new schedules, leading to a request for revisions to the agreement made last year.
Adding to the grim price momentum, UNP shares closed down marginally on Jul. 25 after reporting its Q2 earnings results. Its EPS of $2.74 topped Wall Street expectations of $2.70. The company’s revenue was $6.01 billion, missing Wall Street forecasts of $6.06 billion.
On the bright side, UNP updated its full-year outlook and expects the second-half volume outlook to remain uncertain based on economic indicators and coal demand. Additionally, its profitability outlook continues to have positive momentum with strong service products, improving network efficiency, and solid pricing.
For the current fiscal year, ending in December, analysts expect UNP’s EPS to grow 6.3% to $11.11 on a diluted basis. The company’s earnings surprise history is impressive. It beat the consensus estimate in each of the last four quarters.
Among the 23 analysts covering UNP stock, the consensus is a “Moderate Buy.” That’s based on 14 “Strong Buy” ratings, two “Moderate Buys,” and seven “Holds.”
This configuration is more bullish than a month ago, with 13 analysts suggesting a “Strong Buy.”
On Jul. 29, Benchmark Co. analyst Nathan Martin maintained a “Buy” rating on UNP with a price target of $266.
The mean price target of $261.54 represents a 7% premium to UNP’s current price levels. The Street-high price target of $280 suggests an upside potential of 14.5%.
On the date of publication, Neha Panjwani did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
