Union Pacific Corporation (UNP - Free Report) is performing impressively at the moment. Also, we are optimistic about the company’s prospects and believe that the time is right for you to add the stock to portfolio as it is poised to carry the momentum ahead.
Let’s take a look into the factors that make this Zacks Rank #2 (Buy) stock a compelling choice for investors right now.
An Outperformer: Union Pacific has outperformed its industry in a year’s time. The stock has gained 21.9% compared with the industry’s 19.2% growth.
Earnings Estimates Moving Up: Annual estimates for Union Pacific moved north over the past two months, reflecting analysts’ confidence in the stock. Over this period, the Zacks Consensus Estimate for current-year earnings climbed 1.1%. For 2019, the same has been revised upward to the tune of 1.7% over the same time frame.
Given the wealth of information at the company’s disposal, it is in the best interest of investors to be guided by broker advice and the direction of its estimate revisions. This is because the direction of estimate revisions serves as an important pointer when it comes to the price of a stock.
Solid Growth Prospects: The Zacks Consensus Estimate for Union Pacific’s current-year earnings reflects 35.6% improvement year over year. In 2019, the bottom line is anticipated to register 13.9% growth. The stock also has an expected earnings per share growth rate of 7.3% for the next five years.
The scenario is bullish with respect to revenues as well. For 2018, the Zacks Consensus Estimate is pegged at $22.87 billion, mirroring 7.7% revenue growth over 2017. Next year’s average forecast stands at $23.98 billion, reflecting a 4.81% growth year over year.
Bullish Industry Rank: The industry, to which Union Pacific belongs, currently has a Zacks Industry Rank of 16 (out of 250 plus groups). Notably, the favorable rank places the companies in the top 6% of the Zacks industries. Studies have shown that 50% of a stock's price movement is attributable to the performance of the industry group it belongs to.
In fact, an average stock in a strong group is likely to outperform a promising stock from a poor industry. This makes it necessary to consider the industry’s performance.
Shareholder-Friendly Attitude: We are impressed with the company’s efforts to reward investors through share buybacks and dividend payouts. In the first nine months of 2018, Union Pacificreturned around $8.7 billion to its stockholders through dividends and buybacks. Of the $8.7 billion, $7 billion and $1.7 billion were returned through buybacks and dividends, respectively. 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.
Robust Freight Scenario: Robust freight activity in the United States is an added positive for Union Pacific. Similar to the past few quarters, freight revenues aided its third-quarter 2018 results and were up 10%. In fact, freight revenues have increased 8% in the first nine months of 2018. Volume growth and lower tax rates are also providing a boost to the company. Union Pacific expects volume growth in low- to mid-single digits for 2018.
Other Stocks to Consider
Investors interested in the Zacks Transportation sector may consider Arcbest Corporation (ARCB - Free Report) , Frontline Ltd. (FRO - Free Report) and Spirit Airlines, Inc. (SAVE - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Arcbest, Frontline and Spirit Airlines have gained 12%, 11% and 35%, respectively, in a year’s time.
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