We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Union Pacific (UNP) Up 17.6% in a Year: More Room to Rally?
Read MoreHide Full Article
Shares of Union Pacific Corporation (UNP - Free Report) have displayed an uptrend on the bourses, gaining 17.6% in a year’s time, outperforming its industry’s 7.7% uptick.
Image Source: Zacks Investment Research
Let’s delve into the reasons for this double-digit price rise and examine if there is any scope for further upside.
Driven by the uptick in the freight scene, Union Pacific, currently carrying a Zacks Rank #2 (Buy), is benefiting primarily from higher freight revenues, which constitute the bulk of its top line. Freight revenues improved 11% year over year in 2021. Segment wise, freight revenues in 2021 increased 12%, 11% and 11% in the bulk, industrial and premium units, respectively. Last year, operating revenues increased 12% to $21.8 billion. Factors like volume growth, higher fuel surcharge revenues, core pricing gains and a favorable business mix aided the top line. Management expects 2022 volumes to grow in excess of 4.8% growth forecast for the industrial production.
UNP’s ability to generate cash is encouraging. Cash from operations in 2021 came in at $9 billion, up 6% year over year. Free cash flow increased 8.8% to $3,523 million in 2021. The cash flow conversion rate was a healthy 93% in 2021. Increasing free cash flow supports the shareholder-friendly activities at Union Pacific.
In 2021, Union Pacific returned $10.1 billion to its shareholders through dividends ($2.8 billion) and buybacks ($7.3 billion). UNP hiked dividend twice in 2021.
Union Pacific is also active on the buyback front. In February 2022, UNP announced that its board of directors cleared a new share repurchase program to buy back up to 100 million of its common stock. The new buyback program will be effective Apr 1, 2022, replacing the current repurchase plan, which will expire on Mar 31, 2022. The duration of the new share buyback plan is three years, implying that it will expire on Mar 31, 2025.
Management anticipates share repurchases in 2022 to align with the 2021 levels. Additionally, UNP expects a dividend payout of approximately 45% (of earnings) in 2022.
With economic activities picking up and likely to gain a further pace in the coming days, freight demand might continue its northward movement. This is likely to support growth at UNP as freight revenues and volumes are likely to improve further. That the future is bright for UNP is supported by the Zacks Consensus Estimate for 2022 earnings being revised 2.3% upward over the past 60 days.
Other Stocks to Consider
Investors interested in the Zacks Transportation sector may also consider Expeditors International of Washington (EXPD - Free Report) and ArcBest Corporation (ARCB - Free Report) .
Expeditors currently sports a Zacks Rank #1 (Strong Buy). Upbeat airfreight revenues bolster EXPD. Expanded higher airfreight tonnage volumes aided results in each of the four quarters of 2021.
Shares of Expeditors have gained 9.5% in a year’s time. In May 2021, EXPD announced an 11.5% hike in its semi-annual cash dividend, taking the total to 58 cents per share. EXPD has an impressive record with respect to utilizing its shareholders’ money. The optimism surrounding the stock is evident from the 7.1% northbound revision of the Zacks Consensus Estimate for its 2022 earnings over the past 60 days.
ArcBest currently sports a Zacks Rank of 1. ARCB has a stellar surprise history. Its earnings outperformed the Zacks Consensus Estimate in each of the preceding four quarters, the average being 31.4%.
Shares of ArcBest have surged 44.5% in a year’s time. Improving freight conditions in the United States bode well for ARCB. Solid customer demand and higher market rates are supporting growth at ARCB.
Image: Bigstock
Union Pacific (UNP) Up 17.6% in a Year: More Room to Rally?
Shares of Union Pacific Corporation (UNP - Free Report) have displayed an uptrend on the bourses, gaining 17.6% in a year’s time, outperforming its industry’s 7.7% uptick.
Image Source: Zacks Investment Research
Let’s delve into the reasons for this double-digit price rise and examine if there is any scope for further upside.
Driven by the uptick in the freight scene, Union Pacific, currently carrying a Zacks Rank #2 (Buy), is benefiting primarily from higher freight revenues, which constitute the bulk of its top line. Freight revenues improved 11% year over year in 2021. Segment wise, freight revenues in 2021 increased 12%, 11% and 11% in the bulk, industrial and premium units, respectively. Last year, operating revenues increased 12% to $21.8 billion. Factors like volume growth, higher fuel surcharge revenues, core pricing gains and a favorable business mix aided the top line. Management expects 2022 volumes to grow in excess of 4.8% growth forecast for the industrial production.
UNP’s ability to generate cash is encouraging. Cash from operations in 2021 came in at $9 billion, up 6% year over year. Free cash flow increased 8.8% to $3,523 million in 2021. The cash flow conversion rate was a healthy 93% in 2021. Increasing free cash flow supports the shareholder-friendly activities at Union Pacific.
In 2021, Union Pacific returned $10.1 billion to its shareholders through dividends ($2.8 billion) and buybacks ($7.3 billion). UNP hiked dividend twice in 2021.
Union Pacific is also active on the buyback front. In February 2022, UNP announced that its board of directors cleared a new share repurchase program to buy back up to 100 million of its common stock. The new buyback program will be effective Apr 1, 2022, replacing the current repurchase plan, which will expire on Mar 31, 2022. The duration of the new share buyback plan is three years, implying that it will expire on Mar 31, 2025.
Management anticipates share repurchases in 2022 to align with the 2021 levels. Additionally, UNP expects a dividend payout of approximately 45% (of earnings) in 2022.
With economic activities picking up and likely to gain a further pace in the coming days, freight demand might continue its northward movement. This is likely to support growth at UNP as freight revenues and volumes are likely to improve further. That the future is bright for UNP is supported by the Zacks Consensus Estimate for 2022 earnings being revised 2.3% upward over the past 60 days.
Other Stocks to Consider
Investors interested in the Zacks Transportation sector may also consider Expeditors International of Washington (EXPD - Free Report) and ArcBest Corporation (ARCB - Free Report) .
Expeditors currently sports a Zacks Rank #1 (Strong Buy). Upbeat airfreight revenues bolster EXPD. Expanded higher airfreight tonnage volumes aided results in each of the four quarters of 2021.
Shares of Expeditors have gained 9.5% in a year’s time. In May 2021, EXPD announced an 11.5% hike in its semi-annual cash dividend, taking the total to 58 cents per share. EXPD has an impressive record with respect to utilizing its shareholders’ money. The optimism surrounding the stock is evident from the 7.1% northbound revision of the Zacks Consensus Estimate for its 2022 earnings over the past 60 days.
ArcBest currently sports a Zacks Rank of 1. ARCB has a stellar surprise history. Its earnings outperformed the Zacks Consensus Estimate in each of the preceding four quarters, the average being 31.4%.
Shares of ArcBest have surged 44.5% in a year’s time. Improving freight conditions in the United States bode well for ARCB. Solid customer demand and higher market rates are supporting growth at ARCB.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.