Union Pacific Corporation - Value

Market charts plus calculator

The railroads have been on a tear since the Great Recession. Union Pacific Corporation ( UNP ) reported record first quarter results in April. Despite shares hitting new 10-year highs, this Zacks #2 Rank (Buy) still has value, with a forward P/E of 14.1.

Union Pacific operates Union Pacific Railroad which operates in 23 western states and serves 6 Mexico gateways. It transports agricultural products, autos, chemicals, energy products, industrial products and intermodal.

Record First Quarter

On Apr 19, Union Pacific reported first quarter results and surprised on the Zacks Consensus by 9.2%. Earnings were $1.79 compared to the consensus of $1.64. This was the fourth earnings beat in a row but it continued an impressive earnings surprise record. It has only missed once in the last 5 years.

It saw revenue growth in all six of its business groups despite the weakness in coal. Automotive led the way, up 26% followed by Industrial Products which rose 25%.

2012 Zacks Consensus Estimate Rises

Out of 23 estimates, 1 has risen and 1 has been lowered for the full year in the last 30 days.

However, over the last 90 days, the Zacks Consensus has risen 5 cents to $8.12. The analysts clearly don't see a slowdown yet.

That is still earnings growth of 20.8% as the company only made $6.72 in 2011.

Shares At 10 Year Highs

It has paid to be in the railroad stocks the last few years and Union Pacific is no exception.

Shares recently traded at new 10-year highs.

However, due to rising earnings, valuations are still attractive.

In addition to a P/E under 15, which is my cut-off for value, it has a price-to-book ratio of 2.9. A P/B ratio under 3.0 usually indicates value.

Is it the cheapest value stock in the universe? No. But it still has value characteristics.

Shareholders are also rewarded with a dividend, currently yielding 2.1%.

Railroad demand is an indicator of health in the economy. I will be closely watching this sector in the upcoming earnings season for clues about the strength of the recovery.

This Week's Value Zacks Rank Buy Stocks

Are the good times over for the agriculture companies? AGCO Corporation ( AGCO ) is still expected to post double digit earnings growth in 2012 as agriculture equipment demand stays strong. This Zacks #1 Rank (Strong Buy) is also cheap, with a forward P/E of just 7.5 as shares have weakened in the last few weeks. Read the full article.

Fears of a global economic slowdown have taken their toll on chemical stocks like Koppers Holdings Inc. ( KOP ). The stock recently traded more than 20% below its 52-week high seen in early May. Read the full article.

EnerSys ( ENS ) recently delivered its 3rd consecutive positive earnings surprise as strength in the Americas and Asia more than offset softness in Europe. Analysts revised their estimates higher going forward, sending the stock to a Zacks #1 Rank (Strong Buy). Despite strong earnings momentum, shares trade at just 9x forward earnings and sport a PEG ratio of 0.7. Read the full article.

Unlike most airlines, Alaska Air Group Inc. ( ALK ) has a solid balance sheet, has been consistently profitable the last several years and generates solid profit margins and attractive returns on capital. Read the full article.

Tracey Ryniec is the Value Stock Strategist for . She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her on twitter at @TraceyRyniec .

UNION PAC CORP (UNP): Free Stock Analysis Report

UNION PAC CORP (UNP): Free Stock Analysis Report

UNION PAC CORP (UNP): Free Stock Analysis Report

To read this article on click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Other Topics


Latest Markets Videos


Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at

Learn More