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.
Here's Why You Should Retain Union Pacific Stock for Now
Read MoreHide Full Article
Union Pacific’s (UNP - Free Report) cost-cutting approach is boosting the 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
Core pricing gains, enhanced operational efficiency and the sale of intermodal equipment are significantly boosting Union Pacific’s financial performance.
Union Pacific’s commitment to rewarding its shareholders through dividends and share repurchases is commendable. In the latter part of the second quarter of 2024, the company resumed its share repurchase program, buying back more than $100 million in shares.
Recently, Union Pacific announced a 3% quarterly dividend hike to $1.34 per share, marking the 18th consecutive year of annual dividend hikes. The company also plans to repurchase around $1.5 billion in shares by the end of 2024.
The company’s bottom line is benefiting from its proactive cost-cutting initiatives. In the second quarter of 2024, UNP saw a 4% year-over-year decline in overall operating expenses to $3.6 billion. This decrease was driven by productivity improvements across various cost categories, including a 6% drop in compensation and benefits expenses due to a 5% reduction in the headcount.
UNP’s liquidity position is encouraging. The railroad operator exited the second quarter of 2024 with a current ratio (a measure of liquidity) of 1.05 compared to 0.81 at 2023-end. The company exited the June quarter with$1.15 billion in cash and cash equivalents while carrying a current debt load of $727 million. This indicates that Union Pacific has enough cash to meet its debt obligations.
Shares of Union Pacific have rallied 13.6% in the past year compared with its industry’s growth of 9.9% in the same period.
Image Source: Zacks Investment Research
Key Risks Faced by UNP
The freight market downturn, along with the normalization of e-commerce sales and a softening consumer market, is challenging for Union Pacific. Geopolitical uncertainties and high inflation are dampening consumer sentiments, and reduced fuel surcharge revenues are adding to the difficulties. These factors contributed to a 1% decline in volumes year over year in 2023. Given the persistent softness in the freight market, UNP may continue to face revenue challenges in the near term.
UNP’s 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 C.H. Robinson Worldwide (CHRW - Free Report) and Westinghouse Air Brake Technologies (WAB - Free Report) .
The company has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters and missed once, delivering an average surprise of 7.3%. Shares of CHRW have risen 13.9% in the past year.
WAB holds a Zacks Rank #2 (Buy) at present and has an expected earnings growth rate of 26% 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 11.8%. Shares of WAB have climbed 49.2% in the past year.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Here's Why You Should Retain Union Pacific Stock for Now
Union Pacific’s (UNP - Free Report) cost-cutting approach is boosting the 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
Core pricing gains, enhanced operational efficiency and the sale of intermodal equipment are significantly boosting Union Pacific’s financial performance.
Union Pacific’s commitment to rewarding its shareholders through dividends and share repurchases is commendable. In the latter part of the second quarter of 2024, the company resumed its share repurchase program, buying back more than $100 million in shares.
Recently, Union Pacific announced a 3% quarterly dividend hike to $1.34 per share, marking the 18th consecutive year of annual dividend hikes. The company also plans to repurchase around $1.5 billion in shares by the end of 2024.
The company’s bottom line is benefiting from its proactive cost-cutting initiatives. In the second quarter of 2024, UNP saw a 4% year-over-year decline in overall operating expenses to $3.6 billion. This decrease was driven by productivity improvements across various cost categories, including a 6% drop in compensation and benefits expenses due to a 5% reduction in the headcount.
UNP’s liquidity position is encouraging. The railroad operator exited the second quarter of 2024 with a current ratio (a measure of liquidity) of 1.05 compared to 0.81 at 2023-end. The company exited the June quarter with$1.15 billion in cash and cash equivalents while carrying a current debt load of $727 million. This indicates that Union Pacific has enough cash to meet its debt obligations.
Shares of Union Pacific have rallied 13.6% in the past year compared with its industry’s growth of 9.9% in the same period.
Image Source: Zacks Investment Research
Key Risks Faced by UNP
The freight market downturn, along with the normalization of e-commerce sales and a softening consumer market, is challenging for Union Pacific. Geopolitical uncertainties and high inflation are dampening consumer sentiments, and reduced fuel surcharge revenues are adding to the difficulties. These factors contributed to a 1% decline in volumes year over year in 2023. Given the persistent softness in the freight market, UNP may continue to face revenue challenges in the near term.
UNP’s 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 C.H. Robinson Worldwide (CHRW - Free Report) and Westinghouse Air Brake Technologies (WAB - Free Report) .
C.H. Robinson Worldwide currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. CHRW has an expected earnings growth rate of 25.2% for the current year.
The company has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters and missed once, delivering an average surprise of 7.3%. Shares of CHRW have risen 13.9% in the past year.
WAB holds a Zacks Rank #2 (Buy) at present and has an expected earnings growth rate of 26% 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 11.8%. Shares of WAB have climbed 49.2% in the past year.