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Union Pacific (UNP) Stock Hits Fresh 52-Week High: Here's Why
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Shares of Union Pacific Corporation (UNP - Free Report) reached a 52-week high of $250.33 on Dec 28, before retracing a bit to close the day at $249.23. Moreover, the stock has gained 23.3% in a year, outperforming the industry’s 18.9% increase.
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Catalysts Behind the Price Surge
With improved freight market conditions, higher freight revenues drove the Union Pacific stock up. UNP’s freight revenues, which account for the bulk of its top line, have improved 11% year over year in the first nine months of 2021. Segment-wise, freight revenues in the first nine months of 2021 increased 10%,9% and 14% in the bulk, industrial and premium units, respectively.
Owing to strength in its operations, Union Pacific has been resorting to shareholder-friendly activities. In December, the company hiked its quarterly dividend by 10%. This was the second dividend hike announced by the company this year. In the first nine months of 2021, the company returned $7.9 billion to its shareholders through dividends ($2 billion) and buybacks ($5.9 billion). UNP anticipates repurchasing shares worth roughly $7 billion in 2021. It expects a dividend payout of approximately 45% (of earnings) in 2021. These shareholder-friendly activities are also expected to have boosted the stock.
Union Pacific’s strong free cash flow generation capacity supports its shareholder-friendly activities. Free cash flow increased 37.6% year over year to $2,666 million in the first nine months of 2021. Cash flow conversion rate is a healthy 95%.
Union Pacific’s measures to enhance productivity are also expected to have buoyed its share price. The company’s productivity savings in 2020 were $708 million. In 2021, it expects productivity savings of $350 million. The anticipated reduction in savings is due to weather- and network-related issues rather than any fundamental problem associated with UNP. The company aims to achieve roughly $1.8 billion in productivity since the implementation of the precision scheduled railroading model in 2018.
Zacks Rank & Key Picks
Union Pacific carries a Zacks Rank #3 (Hold).
Here are some better-ranked stocks within the broader Transportation sector:
ArcBest Corporation (ARCB - Free Report) flaunts a Zacks Rank #1 (Strong Buy). The company has a stellar earnings surprise history. It has outperformed the Zacks Consensus Estimate for earnings in each of the preceding four quarters, the average surprise being 27.4%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of ArcBest have surged more than 100% in a year’s time.
Expeditors International of Washington (EXPD - Free Report) carries a Zacks Rank #1. The company’s earnings have outperformed the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 29.1%.
Shares of Expeditors have appreciated more than 41% so far this year.
Schneider National (SNDR - Free Report) carries a Zacks Rank #2 (Buy). The company’s earnings have trumped the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 21%.
Shares of Schneider National have rallied more than 31% so far this year.
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Union Pacific (UNP) Stock Hits Fresh 52-Week High: Here's Why
Shares of Union Pacific Corporation (UNP - Free Report) reached a 52-week high of $250.33 on Dec 28, before retracing a bit to close the day at $249.23. Moreover, the stock has gained 23.3% in a year, outperforming the industry’s 18.9% increase.
Catalysts Behind the Price Surge
With improved freight market conditions, higher freight revenues drove the Union Pacific stock up. UNP’s freight revenues, which account for the bulk of its top line, have improved 11% year over year in the first nine months of 2021. Segment-wise, freight revenues in the first nine months of 2021 increased 10%,9% and 14% in the bulk, industrial and premium units, respectively.
Owing to strength in its operations, Union Pacific has been resorting to shareholder-friendly activities. In December, the company hiked its quarterly dividend by 10%. This was the second dividend hike announced by the company this year. In the first nine months of 2021, the company returned $7.9 billion to its shareholders through dividends ($2 billion) and buybacks ($5.9 billion). UNP anticipates repurchasing shares worth roughly $7 billion in 2021. It expects a dividend payout of approximately 45% (of earnings) in 2021. These shareholder-friendly activities are also expected to have boosted the stock.
Union Pacific’s strong free cash flow generation capacity supports its shareholder-friendly activities. Free cash flow increased 37.6% year over year to $2,666 million in the first nine months of 2021. Cash flow conversion rate is a healthy 95%.
Union Pacific’s measures to enhance productivity are also expected to have buoyed its share price. The company’s productivity savings in 2020 were $708 million. In 2021, it expects productivity savings of $350 million. The anticipated reduction in savings is due to weather- and network-related issues rather than any fundamental problem associated with UNP. The company aims to achieve roughly $1.8 billion in productivity since the implementation of the precision scheduled railroading model in 2018.
Zacks Rank & Key Picks
Union Pacific carries a Zacks Rank #3 (Hold).
Here are some better-ranked stocks within the broader Transportation sector:
ArcBest Corporation (ARCB - Free Report) flaunts a Zacks Rank #1 (Strong Buy). The company has a stellar earnings surprise history. It has outperformed the Zacks Consensus Estimate for earnings in each of the preceding four quarters, the average surprise being 27.4%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of ArcBest have surged more than 100% in a year’s time.
Expeditors International of Washington (EXPD - Free Report) carries a Zacks Rank #1. The company’s earnings have outperformed the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 29.1%.
Shares of Expeditors have appreciated more than 41% so far this year.
Schneider National (SNDR - Free Report) carries a Zacks Rank #2 (Buy). The company’s earnings have trumped the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 21%.
Shares of Schneider National have rallied more than 31% so far this year.