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Here's Why You Should Retain Union Pacific's (UNP) Stock Now
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Union Pacific’s (UNP - Free Report) cost-cutting approach is boosting the company’s bottom line. A shareholder-friendly approach and efforts to expand are also commendable. However, the freight market downturn is adversely impacting the company’s performance.
Factors Favoring UNP
In the first quarter of 2024, Union Pacific reduced operating expenses by 3% year over year, driven by cost-cutting measures, such as deploying longer trains and increasing freight car velocity. These efforts are improving the company’s efficiency as well as boosting its bottom line. Fuel expenses plunged 14%. Expenses on purchased services and materials fell by 6%. Other cost items, too, declined 1% year over year.
Union Pacific’s proactive efforts to expand are encouraging. At the beginning of the third quarter of 2024, the company announced five new Focus Sites, providing businesses with additional connections to integrate rail into their supply chain. Incorporating UNP’s rail services into business supply chains can drive growth, optimize operations and bolster the company's standing in the industry, thereby boosting its top line.
Moreover, Union Pacific’s initiative to cut greenhouse gas emissions is commendable. UNP has committed to a 50.4% reduction in scope 1 and scope 2 emissions by 2030. Low-carbon fuel use has surpassed 6%, with a target of 20% by 2030. The company is also developing hybrid battery-electric locomotives. Such initiatives align with global sustainability trends and strategically enhance its competitive edge, boosting investor confidence.
The company’s commitment to reward its shareholders through dividends and buybacks is encouraging. In the latest shareholder-friendly move, in July, Union Pacific announced a 3% increase in its quarterly dividend, raising it to $1.34 per share. This highlights UNP's 125-year tradition of consistent dividends and commitment to shareholders.
A glimpse at Union Pacific’s price trend reveals that its shares have risen 11.7% in the past year compared with its industry’s 5.4% appreciation.
Image Source: Zacks Investment Research
Key Risks
The freight market downturn is hurting UNP’s prospects.The company is grappling with below-par freight rates, which are adversely impacting its performance. The Cass Freight Shipments Index fell 1.8% in June and has declined in three of the last five months, highlighting weak freight demand. Freight revenues, accounting for 93.2% of the top line, decreased 1% to $5.62 billion.
Compensation and benefits, accounting for 46% of the operating expenses, were up 4% year over year.
Union Pacific exited the first quarter of 2024 with cash and cash equivalents of $925 million compared with $1.06 billion in the same period in 2023. Debt (due after a year) increased to $31.20 billion at the March-end quarter from $31.16 billion at 2023-end.
SKYW has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average surprise of 128%. Shares of SkyWest have jumped 101.7% in the past year.
KEX has a Zacks Rank #2 (Buy) at present. Kirby has an expected earnings growth rate of 42.5% for the current year.
The company has an encouraging track record with respect to the earnings surprise, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters. The average beat is 10.3%. Shares of Kirby have climbed 59.8% in the past year.
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Here's Why You Should Retain Union Pacific's (UNP) Stock Now
Union Pacific’s (UNP - Free Report) cost-cutting approach is boosting the company’s bottom line. A shareholder-friendly approach and efforts to expand are also commendable. However, the freight market downturn is adversely impacting the company’s performance.
Factors Favoring UNP
In the first quarter of 2024, Union Pacific reduced operating expenses by 3% year over year, driven by cost-cutting measures, such as deploying longer trains and increasing freight car velocity. These efforts are improving the company’s efficiency as well as boosting its bottom line. Fuel expenses plunged 14%. Expenses on purchased services and materials fell by 6%. Other cost items, too, declined 1% year over year.
Union Pacific’s proactive efforts to expand are encouraging. At the beginning of the third quarter of 2024, the company announced five new Focus Sites, providing businesses with additional connections to integrate rail into their supply chain. Incorporating UNP’s rail services into business supply chains can drive growth, optimize operations and bolster the company's standing in the industry, thereby boosting its top line.
Moreover, Union Pacific’s initiative to cut greenhouse gas emissions is commendable. UNP has committed to a 50.4% reduction in scope 1 and scope 2 emissions by 2030. Low-carbon fuel use has surpassed 6%, with a target of 20% by 2030. The company is also developing hybrid battery-electric locomotives. Such initiatives align with global sustainability trends and strategically enhance its competitive edge, boosting investor confidence.
The company’s commitment to reward its shareholders through dividends and buybacks is encouraging. In the latest shareholder-friendly move, in July, Union Pacific announced a 3% increase in its quarterly dividend, raising it to $1.34 per share. This highlights UNP's 125-year tradition of consistent dividends and commitment to shareholders.
A glimpse at Union Pacific’s price trend reveals that its shares have risen 11.7% in the past year compared with its industry’s 5.4% appreciation.
Image Source: Zacks Investment Research
Key Risks
The freight market downturn is hurting UNP’s prospects.The company is grappling with below-par freight rates, which are adversely impacting its performance. The Cass Freight Shipments Index fell 1.8% in June and has declined in three of the last five months, highlighting weak freight demand. Freight revenues, accounting for 93.2% of the top line, decreased 1% to $5.62 billion.
Compensation and benefits, accounting for 46% of the operating expenses, were up 4% year over year.
Union Pacific exited the first quarter of 2024 with cash and cash equivalents of $925 million compared with $1.06 billion in the same period in 2023. Debt (due after a year) increased to $31.20 billion at the March-end quarter from $31.16 billion at 2023-end.
Zacks Rank
UNP currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks for investors’ consideration in the Zacks Transportation sector include SkyWest (SKYW - Free Report) and Kirby Corporation (KEX - Free Report) .
SkyWest currently sports a Zacks Rank #1 (Strong Buy) and has an expected earnings growth rate of 787% for the current year. You can see the complete list of today’s Zacks #1 Rank stocks here.
SKYW has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average surprise of 128%. Shares of SkyWest have jumped 101.7% in the past year.
KEX has a Zacks Rank #2 (Buy) at present. Kirby has an expected earnings growth rate of 42.5% for the current year.
The company has an encouraging track record with respect to the earnings surprise, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters. The average beat is 10.3%. Shares of Kirby have climbed 59.8% in the past year.