On Monday, Deutsche Bank reaffirmed its Buy rating on Union Pacific Corporation (NYSE:UNP) with a steady price target of $266.00. The analysis highlighted that despite Union Pacific being the top-performing railroad stock over the past year, it has recently become the worst performer year-to-date. The stock's decline has been notable since early March, falling below levels seen after the initial surge known as the "Vena bump."
Union Pacific's recent operational metrics have been a point of interest, with freight car velocity increasing by 4% year-over-year in the first quarter, averaging 204 miles per day. Additionally, the overall train velocity has seen an 11% increase, reaching 19.5 miles per hour. The company has also managed to reduce switch and run-through car dwell by 7%, and operating car inventory has decreased by 4%. These improvements are considered key indicators of a well-run railroad, which could lead to better cost performance in the upcoming quarter, despite potentially weaker revenue.
The report suggests that while the volume data has been somewhat disappointing, bouncing around mid-150,000 carloads per week, the impressive operating metrics could hint at a stronger operational foundation. The analyst expressed optimism for growth as the company heads into seasonally strong months, historically showing a 5% sequential increase in industrial carload, including chemicals, plastics, metals, and minerals, which contribute positively to margins. A similar 5% sequential rise in intermodal volumes is anticipated.
Furthermore, there is perceived opportunity for Union Pacific to improve price and yield as more contracts come up for renewal. The report indicates that Union Pacific's renewed efforts in operations are starting to show results, and there is hope that this will lead to positive earnings revisions in the near future.
InvestingPro Insights
Following Deutsche Bank's reaffirmation of a Buy rating for Union Pacific Corporation (NYSE:UNP), current InvestingPro data and tips offer additional insights into the company's financial health and market position. With a market capitalization of $141.59 billion and a P/E ratio of 22.09, Union Pacific stands as a significant player in the Ground Transportation industry. The company's commitment to shareholder returns is evident, having raised its dividend for 17 consecutive years, and maintaining dividend payments for an impressive 54 years. This is further supported by a solid gross profit margin of 53.48% over the last twelve months as of Q1 2023, underscoring Union Pacific's operational efficiency.
InvestingPro Tips highlight Union Pacific's low price volatility and its status as a prominent player in its industry. However, it's worth noting that eight analysts have revised their earnings expectations downwards for the upcoming period, which investors should consider. Despite this, analysts predict the company will be profitable this year, with a profitability track record over the last twelve months.
For readers looking to delve deeper into Union Pacific's financials and market prospects, there are additional InvestingPro Tips available. To access these insights and help inform your investment decisions, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at https://www.investing.com/pro/UNP.
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