Union Pacific (NYSE: UNP) – Union Pacific is rail transport company based in Omaha, Nebraska. The company offers transportation services for agricultural products, food and beverage products, and automotive products.
In addition, the company transports chemicals, plastics, petroleum, and coal. The company operates over 32,000 miles of rail that stretches from the Pacific Coast, Gulf Coast, and Atlantic Coast. The company was founded in 1862.
Union Pacific has seen solid earnings growth over the last three years, averaging annual growth of 9% per year.
The growth has accelerated recently and the most recent earnings report showed year over year growth of 39% and analysts expect the company to show growth of 35% for the year.
Sales growth hasn’t been as impressive as the earnings growth, but this is a company in an established industry.
Sales have grown at a rate of 1% per year over the last three years while they grew by 10% in the most recent quarter.
The most impressive fundamental readings for UNP might be the management efficiency measurements. The company boasts a return on equity of 20.9%, a profit margin of 35%, and an operating margin of 38.2%.
There is a certain amount of pessimism from analysts as 16 rate the company as a “hold” and one rates it as a “sell”. There are only 12 analysts that rate Union Pacific as a “buy”. This could be a case of a rail transport company not being “sexy” enough for analysts.
The weekly chart for Union Pacific shows how the company has been trending higher since early 2016. I drew the trend channel based on the highs being connected and then drew a parallel lower rail to arrive at the trend channel that you see. One thing that jumped out to me was how the stock has responded with a bounce when it has touched its 52-week moving average and it just did that again this past week.
The overbought/oversold indicators haven’t dropped all the way down to oversold territory, but they are the lowest they have been in the last 15 months.
Suggested strategy: Buy UNP with a maximum entry price of $147. I would set a target of at least $200 over the next 12 months (for a potential return of almost 40% from current prices). I would also suggest a stop at $135.
— Rick Pendergraft