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Headquartered in Omaha, Nebraska, Union Pacific Corporation (UNP) is a leading force in the transportation and logistics industry. With a market cap of $142.8 billion, Union Pacific plays a pivotal role in connecting businesses and consumers across North America through its extensive railroad network.
Union Pacific stock has underperformed the broader market considerably over the past year. The stock gained 6.9% over this time frame, while the broader S&P 500 Index ($SPX) rallied nearly 30.6%. In 2024, UNP stock is down 4.6%, while SPX is up 23.6% on a YTD basis.
Zooming in further, UNP has underperformed the iShares Transportation Average ETF’s (IYT) 20.4% returns over the past 52 weeks and 10% gains on a YTD basis.
Union Pacific shares have underperformed the broader market and its peers due to concerns about decreased demand for freight transportation services. The company has also faced operational efficiency and cost management challenges, which have contributed to its underperformance in recent months.
Shares of Union Pacific dropped 4.4% following the release of its Q3 earnings on Oct. 24. The company reported revenue of $6.09 billion, reflecting 2.5% year-over-year growth and meeting analyst expectations. However, EPS came in at $2.75, falling short of consensus by 1.1%. The company improved its gross margin to 55.4% from 53% a year ago, and its operating margin improved to 39.7% from 36.6%.
For the current fiscal year, ending in December, analysts expect Union Pacific’s EPS to grow 4.7% to $10.94 on a diluted basis. The company’s earnings surprise history is mixed. It beat the consensus estimate in three of the last four quarters while missing the forecast on one other occasion.
Among the 25 analysts covering UNP stock, the consensus is a “Moderate Buy.” That’s based on 14 “Strong Buy” ratings, one “Moderate Buy,” and 10 “Holds.”
This configuration is less bullish than three months ago when 15 analysts suggested a "Strong Buy."
On Nov. 13, Barclays raised Union Pacific's price target to $285 – the Street-high which indicates an upside potential of 21.6% - citing potential benefits from lower corporate tax rates and improved sentiment for U.S. industrial stocks.
The mean price target of $259.96 represents a 10.9% premium to UNP’s current price levels.
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