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Can Union Pacific (UNP) Sustain an Earnings Beat in Q3?
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Union Pacific Corporation (UNP - Free Report) is slated to release third-quarter 2018 results on Oct 25, before the market opens.
Last reported quarter, the company delivered a positive earnings surprise of 2.1%. This apart, it outperformed on the revenue front. Moreover, both measures improved on a year-over-year basis. Higher freight revenues aided such impressive results.
Things seem to be looking up for the company in the third quarter as well with the Zacks Consensus Estimate having risen 1.5% over the past 60 days.
What the Zacks Model Unveils
Our proven model shows that Union Pacific is likely to beat on earnings this quarter as well on the back of the following two key ingredients:
Earnings ESP: Union Pacific has an Earnings ESP of +0.57% as the Most Accurate Estimate is pegged at $2.11 per share, above the Zacks Consensus Estimate of $2.09. A positive ESP indicates a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Union Pacific carries a Zacks Rank #2 (Buy). Notably, stocks with a favorable Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) when combined with a positive ESP have significantly higher chances of beating estimates.
Conversely, the Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement, especially when the company is witnessing negative estimate revisions.
A thriving and improving economy has been leading to a robust freight activity in the United States. Akin to the past few quarters, this upbeat freight scenario is likely to generate higher freight revenues in the third quarter as well. The Zacks Consensus Estimate for third-quarter freight revenues stands at $5,461 million, higher than $5,317 million reported in the second quarter. With freight generating the major share of revenues, higher revenues from the segment should boost the company’s top line in the soon-to-be-reported quarter.
Within freight, the Agricultural products, Energy and Industrial products segments are expected to perform well in the quarter. The Zacks Consensus Estimate for third-quarter Agricultural products freight revenues is pegged at $1,134 million, higher than $1,114 million and $914 million in the previous and the year-ago quarters, respectively.
The same for freight revenues at the Energy division stands at $1,240 million, above $1,111 million and $648 million reported in the preceding quarter and the prior-year quarter, respectively. Also, the consensus mark for industrial products freight revenues is projected at $1,442 million, higher than $1,437 million in the last reported quarter. The consensus estimate also stands above $1,079 million recorded a year earlier.
Further, volume growth and lower tax rates are expected to lift earnings in the third quarter. Notably, massive savings from the reduced tax rates have been bolstering the company’s free cash flow, enabling it to indulge in frequent dividend hikes. This July, Union Pacific announced a dividend hike to the tune of 10% for the third time since November 2017.
However, the company’s high operating expenses might be a drag on its bottom-line growth.
Other Stocks to Consider
Investors interested in the broader Transportation sector may also consider Southwest Airlines Co. (LUV - Free Report) , Old Dominion Freight Line, Inc. (ODFL - Free Report) and C.H. Robinson Worldwide, Inc. (CHRW - Free Report) as these stocks too possess the right combination of elements to come up with an earnings beat in their next releases.
Old Dominion Freight Line has an Earnings ESP of +0.69% and a Zacks Rank of 2. The company will release third-quarter 2018 results on Oct 25.
C.H. Robinson has an Earnings ESP of +0.56% and is a Zacks #2 Ranked player. The company will announce third-quarter financial figures on Oct 30.
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Can Union Pacific (UNP) Sustain an Earnings Beat in Q3?
Union Pacific Corporation (UNP - Free Report) is slated to release third-quarter 2018 results on Oct 25, before the market opens.
Last reported quarter, the company delivered a positive earnings surprise of 2.1%. This apart, it outperformed on the revenue front. Moreover, both measures improved on a year-over-year basis. Higher freight revenues aided such impressive results.
Things seem to be looking up for the company in the third quarter as well with the Zacks Consensus Estimate having risen 1.5% over the past 60 days.
What the Zacks Model Unveils
Our proven model shows that Union Pacific is likely to beat on earnings this quarter as well on the back of the following two key ingredients:
Earnings ESP: Union Pacific has an Earnings ESP of +0.57% as the Most Accurate Estimate is pegged at $2.11 per share, above the Zacks Consensus Estimate of $2.09. A positive ESP indicates a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Union Pacific carries a Zacks Rank #2 (Buy). Notably, stocks with a favorable Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) when combined with a positive ESP have significantly higher chances of beating estimates.
Conversely, the Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement, especially when the company is witnessing negative estimate revisions.
Union Pacific Corporation Price and EPS Surprise
Union Pacific Corporation Price and EPS Surprise | Union Pacific Corporation Quote
Factors Likely at Play
A thriving and improving economy has been leading to a robust freight activity in the United States. Akin to the past few quarters, this upbeat freight scenario is likely to generate higher freight revenues in the third quarter as well. The Zacks Consensus Estimate for third-quarter freight revenues stands at $5,461 million, higher than $5,317 million reported in the second quarter. With freight generating the major share of revenues, higher revenues from the segment should boost the company’s top line in the soon-to-be-reported quarter.
Within freight, the Agricultural products, Energy and Industrial products segments are expected to perform well in the quarter. The Zacks Consensus Estimate for third-quarter Agricultural products freight revenues is pegged at $1,134 million, higher than $1,114 million and $914 million in the previous and the year-ago quarters, respectively.
The same for freight revenues at the Energy division stands at $1,240 million, above $1,111 million and $648 million reported in the preceding quarter and the prior-year quarter, respectively. Also, the consensus mark for industrial products freight revenues is projected at $1,442 million, higher than $1,437 million in the last reported quarter. The consensus estimate also stands above $1,079 million recorded a year earlier.
Further, volume growth and lower tax rates are expected to lift earnings in the third quarter. Notably, massive savings from the reduced tax rates have been bolstering the company’s free cash flow, enabling it to indulge in frequent dividend hikes. This July, Union Pacific announced a dividend hike to the tune of 10% for the third time since November 2017.
However, the company’s high operating expenses might be a drag on its bottom-line growth.
Other Stocks to Consider
Investors interested in the broader Transportation sector may also consider Southwest Airlines Co. (LUV - Free Report) , Old Dominion Freight Line, Inc. (ODFL - Free Report) and C.H. Robinson Worldwide, Inc. (CHRW - Free Report) as these stocks too possess the right combination of elements to come up with an earnings beat in their next releases.
Southwest has an Earnings ESP of +1.61% and a Zacks Rank #3. The company will report third-quarter earnings on Oct 25. You can see the complete list of today’s Zacks #1 Rank stocks here.
Old Dominion Freight Line has an Earnings ESP of +0.69% and a Zacks Rank of 2. The company will release third-quarter 2018 results on Oct 25.
C.H. Robinson has an Earnings ESP of +0.56% and is a Zacks #2 Ranked player. The company will announce third-quarter financial figures on Oct 30.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>