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Union Pacific (UNP) Hurt by Weak Demand and High Debts
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We recently issued an updated report on Union Pacific Corporation (UNP - Free Report) . Factors like innovative cost-control initiatives and free cash flow generation are impressive. Meanwhile, sluggish volumes and declining shipments due to the coronavirus pandemic are hurdles.
The company's efforts to check on costs to drive the bottom line are encouraging. In fact, operating ratio (operating expenses as a percentage of revenues) has been improving mainly owing to its cost-cut efforts. Operating ratio, which expanded 210 basis points (bps) year over year to 60.6% in 2019, is expected to improve further. We are also pleased by the efforts of Union Pacific to promote safety and enhance productivity. The lacklustre freight scenario in the United States resulted in freight revenues declining 5% year over year in 2019 to $20.2 billion. Overall volumes (car loadings) declined 6% due to weakness in the agricultural products, premium and energy segments as well as due to the global pandemic. Moreover, the coronavirus pandemic is likely to have hurt first-quarter 2020 performance (detailed results should be out on Apr 23). In fact, results for the full year might also be adversely impacted due to the pandemic.
Union Pacific’s escalating debt levels are worrisome too. Debt/EBITDA ratio (adjusted) at Union Pacific stands at 2.5 at the end of 2019. A high Debt/EBITDA ratio often indicates that a firm may be unable to clear its debt appropriately. The company's investment toward enhancement of its facilities, resulting in higher capital expenditure ($3.2 billion in 2019), is likely to limit bottom-line growth.
Negative Estimate Revisions and Weak Momentum Score
The pessimism revolving around the stock is evident from the Zacks Consensus Estimate for current year earnings being revised downward by 17.4% in the past 60 days to $7.81.
The company’s Momentum Score of D further highlights its short-term unattractiveness.
Zacks Rank and Stocks to Consider
Currently, Union Pacific carry a Zacks Rank #4 (Sell).
Long-term (three to five years) expected earnings per share growth rate for GATX, Spirit and Höegh LNG is pegged at 15%, 12.5% and 8.5%, respectively.
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Union Pacific (UNP) Hurt by Weak Demand and High Debts
We recently issued an updated report on Union Pacific Corporation (UNP - Free Report) . Factors like innovative cost-control initiatives and free cash flow generation are impressive. Meanwhile, sluggish volumes and declining shipments due to the coronavirus pandemic are hurdles.
The company's efforts to check on costs to drive the bottom line are encouraging. In fact, operating ratio (operating expenses as a percentage of revenues) has been improving mainly owing to its cost-cut efforts. Operating ratio, which expanded 210 basis points (bps) year over year to 60.6% in 2019, is expected to improve further. We are also pleased by the efforts of Union Pacific to promote safety and enhance productivity. The lacklustre freight scenario in the United States resulted in freight revenues declining 5% year over year in 2019 to $20.2 billion. Overall volumes (car loadings) declined 6% due to weakness in the agricultural products, premium and energy segments as well as due to the global pandemic. Moreover, the coronavirus pandemic is likely to have hurt first-quarter 2020 performance (detailed results should be out on Apr 23). In fact, results for the full year might also be adversely impacted due to the pandemic.
Union Pacific Corporation Price
Union Pacific Corporation price | Union Pacific Corporation Quote
Union Pacific’s escalating debt levels are worrisome too. Debt/EBITDA ratio (adjusted) at Union Pacific stands at 2.5 at the end of 2019. A high Debt/EBITDA ratio often indicates that a firm may be unable to clear its debt appropriately. The company's investment toward enhancement of its facilities, resulting in higher capital expenditure ($3.2 billion in 2019), is likely to limit bottom-line growth.
Negative Estimate Revisions and Weak Momentum Score
The pessimism revolving around the stock is evident from the Zacks Consensus Estimate for current year earnings being revised downward by 17.4% in the past 60 days to $7.81.
The company’s Momentum Score of D further highlights its short-term unattractiveness.
Zacks Rank and Stocks to Consider
Currently, Union Pacific carry a Zacks Rank #4 (Sell).
Some better-ranked stocks in the Zacks Transportation sector are GATX Corporation (GATX - Free Report) , Spirit Airlines, Inc. (SAVE - Free Report) and Höegh LNG Partners LP . All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1(Strong Buy) Rank stocks here.
Long-term (three to five years) expected earnings per share growth rate for GATX, Spirit and Höegh LNG is pegged at 15%, 12.5% and 8.5%, respectively.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
See these 7 breakthrough stocks now>>