Union Pacific (UNP) is firing on all cylinders. Volumes are up; pricing is robust; and profit margins are higher. Its business momentum should remain strong throughout the second half of 2010 even if economic growth continues to decelerate.
Growth and Income
The company is expected to grow its earnings per share 42.9% in 2010, 15.5% in 2011, and 13.7% over the long term. Its trailing 12-month return on equity is 13.5%. The stock also offers investors a dividend yield of 1.8%.
This Zacks #2 Rank stock trades at 14.5x 2010 consensus EPS estimates and 12.5x 2011 consensus EPS estimates.
Union Pacific Corporation provides rail transportation services in North America. It has about 32,000 route miles linking Pacific Coast and Gulf Coast ports with the Midwest and eastern US gateways.
On July 22, Union Pacific announced second-quarter results. Revenues grew 27% to $4.2 billion. The company had earnings of $1.40 per share, 19 cents, or 15.7%, ahead of the Zacks Consensus Estimate. Earnings were up 79.5% from the year-ago period.
Chairman and CEO Jim Young said, “While the pace and direction of the economic recovery is uncertain, we expect and are prepared to handle continued volume growth on our network, both in 2010 and beyond. As car loadings increase, we are focused on meeting the increased expectations of customers and shareholders to move new and existing business safely, efficiently and more profitably. We’re also planning for tomorrow, investing for growth as we deliver higher shareholder returns.”
In the last week, the Zacks Consensus Estimates for 2010 is up 20 cents, or 4.0%, to $5.16. The Zacks Consensus Estimate for 2011 is up 14 cents, or 2.4%, to $5.96.
UNP shares are up about 24% in the last year. However, the stock has been in trading range from $68 to $78 since March 2010. UNP has bounced off support several times and looks ready to challenge its highs around $78. A breakout above that level would be bullish. Conversely, a breakdown below the $68 level would be bearish.