Opinions
Genevieve Roch-Decter
Union Pacific Corp
UNP-N
TOP PICK
Apr 04, 2014
Stock price when the opinion was issued
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They just reported: revenues beat though flat for the year, costs are under control, and they beat earnings. Total volumes were up, including fertilizer up 15%, and industrial chemicals 7%. Their report was better than CSX, though guidance was guarded and mixed, including a muted first half of 2024. It's good to buy now.
Premium contentUNP is Warren Buffet's 2nd favorite railroad to own (he owns BNSF). It has paid its dividend for 125 consecutive years. It is prudently using some cash reserves to aggressively retire debt and buy back shares. It trades at 9x earnings and supports a ROE of 45%. The dividend is backed by a payout ratio of 50% of cash flow. We recommend setting a stop-loss at $207, looking to achieve $268 -- upside potential over 17%. Yield 2.2%
(Analysts’ price target is $267.82)Premium contentPremium content
Second-largest railroad company in the US. Have done a really good job over the last few years of controlling their costs, so their bottom line is actually growing faster than their top line. Operating ratio is 2 years ahead of schedule. Have good exposure to the crude by rail theme. Sees 20%-30% upside over the next 2 years based on a growth profitability outlook. Yield of 1.92%.