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Here's Why Union Pacific (UNP) is Still a Buy at 52-Week High
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Union Pacific Corporation (UNP - Free Report) stock is clearly on a tear, having gained 42.4% in a year’s time compared with roughly 27% rise recorded by its industry.
One-Year Price Performance
While shares of this Omaha, NE-based railroad operator have run up considerably and reached their highest level in a year on Sep 18, 2018, there is still reason to add the stock to your portfolio. It looks promising and poised to carry the momentum ahead.
Let’s take a look into the factors why we believe that this Zacks Rank #1 (Strong Buy) stock has further scope for upside going forward.
Robust Earnings Growth Expectations: The Zacks Consensus Estimate for third-quarter 2018 earnings is currently pegged at $2.06, reflecting expected year-over-year growth of 37.3%. Current-year earnings are also anticipated to grow more than 34% on a year-over-year basis.
Rising Earnings Estimates: The Zacks Consensus Estimate for current-quarter earnings has been revised upward to the tune of 2.5% over the last 90 days. For 2018 and 2019, the consensus mark for earnings moved up 1.7% and 1.9%, respectively, in the same timeframe. The favorable estimate revisions reflect the confidence of brokers in the stock.
Given the wealth of information at their disposal, it is in the best interest of investors to be guided by broker advice and the direction of their estimate revisions. This is because the direction of estimate revisions serves as an important pointer when it comes to the price of a stock.
Impressive Revenue Growth: The Zacks Consensus Estimate for 2018 revenues is $22.73 billion, representing 7% revenue growth over 2017 number. Next year’s average forecast is $23.77 billion, mirroring 4.6% year-over-year improvement.
Shareholder-Friendly Attitude: We are impressed by this railroad operator’s efforts to reward shareholders through share repurchases and dividends. In the first half of 2018 Union Pacific rewarded its shareholders to the tune of $7.8 billion through dividends and buybacks.
In July, Union Pacific announced a dividend hike to the tune of 10%. Notably, this is the third dividend hike announced by the company since November 2017. In the first quarter, the company had raised its dividend by 18% to 72 cents a share. Combining the latest hike, Union Pacific has increased its dividend by 29% this year so far. The hikes underscore its strong financial condition and bright prospects. Also, a look at the past records reveal that the company has a stable dividend payment history.
Volume Growth and Increased Efficiencies: Volume growth is aiding Union Pacific immensely and is expected to continue doing so in the remainder of the year.
Meanwhile, Union Pacific’s constant efforts to streamline its operations in order to increase productivity are commendable. To this end, the company recently announced new operating plan — Unified Plan 2020 — incorporating the Precision Scheduled Railroading principles.
The plan is in line with the company’s aim at ensuring a safe, reliable and efficient railroad operation. Benefits from the plan are anticipated to aid Union Pacific in achieving an operating ratio (operating expenses as a percentage of revenues) of 60% by 2020, thus paving the way for an operating ratio of 55%.
Bullish Industry Rank: The industry, to which Union Pacific belongs, currently has a Zacks Industry Rank of 65 (out of 250 plus groups). The favorable rank places the companies in the top 25% of the Zacks industries. Studies have shown that 50% of a stock's price movement is directly tied to the performance of the industry group that it is in.
In fact, an average stock in a strong group is likely to outperform a great stock in a poor industry. Therefore, taking the industry’s performance into account becomes necessary.
Shares of Landstar System, SkyWest and Trinity have rallied more than 28%, 42% and 20%, respectively, in a year’s time.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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Here's Why Union Pacific (UNP) is Still a Buy at 52-Week High
Union Pacific Corporation (UNP - Free Report) stock is clearly on a tear, having gained 42.4% in a year’s time compared with roughly 27% rise recorded by its industry.
One-Year Price Performance
While shares of this Omaha, NE-based railroad operator have run up considerably and reached their highest level in a year on Sep 18, 2018, there is still reason to add the stock to your portfolio. It looks promising and poised to carry the momentum ahead.
Let’s take a look into the factors why we believe that this Zacks Rank #1 (Strong Buy) stock has further scope for upside going forward.
Robust Earnings Growth Expectations: The Zacks Consensus Estimate for third-quarter 2018 earnings is currently pegged at $2.06, reflecting expected year-over-year growth of 37.3%. Current-year earnings are also anticipated to grow more than 34% on a year-over-year basis.
Rising Earnings Estimates: The Zacks Consensus Estimate for current-quarter earnings has been revised upward to the tune of 2.5% over the last 90 days. For 2018 and 2019, the consensus mark for earnings moved up 1.7% and 1.9%, respectively, in the same timeframe. The favorable estimate revisions reflect the confidence of brokers in the stock.
Given the wealth of information at their disposal, it is in the best interest of investors to be guided by broker advice and the direction of their estimate revisions. This is because the direction of estimate revisions serves as an important pointer when it comes to the price of a stock.
Impressive Revenue Growth: The Zacks Consensus Estimate for 2018 revenues is $22.73 billion, representing 7% revenue growth over 2017 number. Next year’s average forecast is $23.77 billion, mirroring 4.6% year-over-year improvement.
Shareholder-Friendly Attitude: We are impressed by this railroad operator’s efforts to reward shareholders through share repurchases and dividends. In the first half of 2018 Union Pacific rewarded its shareholders to the tune of $7.8 billion through dividends and buybacks.
In July, Union Pacific announced a dividend hike to the tune of 10%. Notably, this is the third dividend hike announced by the company since November 2017. In the first quarter, the company had raised its dividend by 18% to 72 cents a share. Combining the latest hike, Union Pacific has increased its dividend by 29% this year so far. The hikes underscore its strong financial condition and bright prospects. Also, a look at the past records reveal that the company has a stable dividend payment history.
Volume Growth and Increased Efficiencies: Volume growth is aiding Union Pacific immensely and is expected to continue doing so in the remainder of the year.
Meanwhile, Union Pacific’s constant efforts to streamline its operations in order to increase productivity are commendable. To this end, the company recently announced new operating plan — Unified Plan 2020 — incorporating the Precision Scheduled Railroading principles.
The plan is in line with the company’s aim at ensuring a safe, reliable and efficient railroad operation. Benefits from the plan are anticipated to aid Union Pacific in achieving an operating ratio (operating expenses as a percentage of revenues) of 60% by 2020, thus paving the way for an operating ratio of 55%.
Bullish Industry Rank: The industry, to which Union Pacific belongs, currently has a Zacks Industry Rank of 65 (out of 250 plus groups). The favorable rank places the companies in the top 25% of the Zacks industries. Studies have shown that 50% of a stock's price movement is directly tied to the performance of the industry group that it is in.
In fact, an average stock in a strong group is likely to outperform a great stock in a poor industry. Therefore, taking the industry’s performance into account becomes necessary.
Other Stocks to Consider
Investors interested in the broader Transportation sector are Landstar System, Inc. (LSTR - Free Report) , SkyWest, Inc. (SKYW - Free Report) and Trinity Industries, Inc. (TRN - Free Report) sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Landstar System, SkyWest and Trinity have rallied more than 28%, 42% and 20%, respectively, in a year’s time.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>