Union Pacific Stock Struggles Amid Market Gains
Union Pacific Corporation (UNP), based in Omaha, Nebraska, stands as a vital player in the transportation and logistics sector. With a market cap of $142.8 billion, it connects businesses and consumers across North America through a vast railroad network.
Stock Performance Lags Behind Industry Peers
In the past year, Union Pacific stock has significantly lagged behind the broader market. While UNP increased by 6.9%, the S&P 500 Index ($SPX) surged nearly 30.6%. As of 2024, UNP has dropped 4.6%, contrasting with SPX’s 23.6% year-to-date rise.
Additionally, UNP has not kept pace with the iShares Transportation Average ETF’s (IYT) returns, which saw a 20.4% gain over the past year and a 10% rise year-to-date.
Concerns Over Demand and Performance
Union Pacific’s stock underperformance stems from worries about decreasing demand for freight transportation services. The company has also struggled with operational efficiency and cost management, which have weighed on its performance recently.
Q3 Earnings Report Reveals Mixed Results
Following the release of its Q3 earnings on October 24, shares of Union Pacific fell 4.4%. The company reported revenue of $6.09 billion, achieving a 2.5% year-over-year growth and aligning with analyst predictions. However, earnings per share (EPS) of $2.75 missed consensus estimates by 1.1%. Notably, the company improved its gross margin to 55.4% from 53% last year, and its operating margin rose to 39.7% from 36.6%.
For the current fiscal year ending in December, analysts anticipate a 4.7% EPS growth to $10.94 on a diluted basis. Union Pacific has had a mixed earnings surprise history, exceeding the consensus estimate in three of the last four quarters while falling short once.
Analyst Ratings Indicate Cautious Optimism
The consensus among the 25 analysts covering UNP stock is a “Moderate Buy,” which includes 14 “Strong Buy” ratings, one “Moderate Buy”, and 10 “Holds.”
This recommendation has softened compared to three months ago, when 15 analysts rated it as a “Strong Buy.” On November 13, Barclays raised the price target for Union Pacific to $285, the highest on Wall Street, suggesting a potential upside of 21.6%. Analysts cited possible gains from lower corporate tax rates and improved outlooks for U.S. industrial stocks.
The average price target for UNP stands at $259.96, indicating a 10.9% premium over current price levels.
On the date of publication, Rashmi Kumari did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
