Jim LebenthalUnion Pacific CorpUNPSELLSep 27, 2024

A lot more interesting than either CP or CNR. Speculation that, some years down the road, UNP could form one railroad with CP.

Right now the US economy is doing better, so this stock's started to pick up again from April lows. But not shooting the lights out. This rail hauls agricultural, auto, and chemical products. 

Biggest challenge is what are these railroads carrying? CNR has suffered in Canada because it's one of the largest shippers of vehicles, and tariffs are causing issues. Economy will drive how well the rails do. They've been going sideways, and there's no catalyst right now. If you want to buy now, you'll need to be patient.

A more attractive choice than CNR, if you don't mind expanding beyond the Canadian sandbox. Purchase of NSC makes it really interesting, merging into a trans-continental railroad with lots of cost savings and synergies. Good upside if the merger goes through.

Transports are doing well. Is benefitting from a merger with Norfolk Southern.

In process of buying a competitor and creating the first transcontinental railroad. A once-in-a-generation opportunity if they can get it right. Better opportunity than CNR for you to expand your portfolio beyond Canada.

Her choice in the space. Better cost management, strong network efficiencies, favourable long-term profit trend.

Operating income in Q4 +5% to $2.5 billion. Was held back by tariff talks; tariffs will hurt, but they have room to move with better volume and pricing. He targets $275.

His concern is its 18x forward PE. A railroad stock can grow only so much more than GDP. Pricing power is limited. He needs to see earnings outperform.

Transports haven't seen a tailwind lately. Has the sector bottomed? The timing is tough for transports now.

Been on a downtrend, though fairly priced. Earnings need to beat for shares to also rise. Trades at 18x forward PE and a PEG ratio of 1.7. A tailwind is US capex spending and all those materials that need transporting, like steel.

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.