UNP Sees Light Thru Tunnel

Tags: unp
3 Dec 3:39am
Posted by ZacksResearch
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We are retaining our Hold on Union Pacific Corporation (UNP), but cutting our target price to $53. In line with earnings guidance provided on September 22, UNP posted 3rd quarter EPS of $1.38, up 37% year over year, and better than consensus of $1.30 and our estimate of $1.15, largely due to higher-than-expected revenue growth and declining fuel costs that contributed about $0.10 per share. Revenues advanced 16% as higher rates (revenue per car up 22%) offset a 5% volume decline.

We are raising our 2008 diluted EPS estimate from $4.15 to $4.54, the mid-point of revised earnings guidance of $4.50-4.60 range (up from $4.00-4.20 before), and our 2009 EPS estimate to $5.10 from $5.00.

UNP should benefit from higher rates (70% of the company's 2009 price plan is locked in), lower fuel costs and improved productivity, which should offset expected volume weakness from a softening economy. UNP recently increased its dividend 23%.

Read the full analyst report on UNP




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