Opinions
Paul Harris, CFA
Union Pacific Corp
UNP-N
WEAK BUY
May 11, 2023
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.
UNP 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)
Great industry to be in with consolidation and pricing power. Environmentally friendly. Rails predict the economy. Numbers were down, so UNP anticipates deceleration in economy. All rails will do really well when we come out of the slowdown. He owns CNR.