Opinions
Stan Wong
Union Pacific Corp
UNP-N
HOLD
Jun 23, 2016
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%
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The 2nd largest railway in the US. We are seeing a lot of these types of names float higher, because valuations just became too cheap. It is currently trading at about 16X forward earnings. It got to a much lower low of close to 13X forward earnings, which is pretty cheap for this type of name.