Union Pacific Just Missed 4Q17 Earnings Estimates: Stock Up 0.3%
Union Pacific’s 4Q17 earnings
On January 25, 2018, Union Pacific (UNP), the Western US rail giant, announced its 4Q17 results. It reported adjusted EPS (earnings per share) of $1.53, just missing the Reuters-surveyed analysts’ estimate by $0.01 per share, or 0.8%. However, on a YoY (year-over-year) basis, Union Pacific posted a 10.1% rise in adjusted EPS of 4Q17 compared with $1.39 in 4Q16.
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UNP stock price reaction
Union Pacific, headquartered in Omaha, Nebraska, is the largest Class I railroad in the United States. The results of freight rail behemoths such as UNP and BNSF Railway (BRK.B) tend to mirror the US economy.
After an initial zigzag on January 26, 2018, Union Pacific stock showed an upward momentum. From $133.60 per share before the 4Q17 announcement, the stock rallied and closed at $136.05 on January 29, 2018. UNP stock gained further momentum and was trading at $136.60 per share on January 30, 2018.
Railroad stocks are expected to benefit from the US tax reforms. Less tax to pay, less capex (capital expenditure), more free cash flow, and higher buybacks could drive railroad stocks in the coming quarters. Union Pacific isn’t an exception. In the last year, it delivered returns of 26.3%. Let’s explore the returns generated by its peer group during the same period:
- CSX (CSX): 20%
- Norfolk Southern (NSC): 25.8%
- Kansas City Southern (KSU): 30.9%
- Canadian Pacific Railway (CP): 22.1%
- Canadian National Railway (CNI): 13.8%
- Genesee & Wyoming (GWR): 4.9%
Investors interested in indirect exposure to transportation stocks could opt for the SPDR S&P Transportation ETF (XTN). Major railroads and airline companies in the United States make up 12.5% and 43.2%, respectively, of XTN’s portfolio holdings.
In this series
In this 4Q17 post-earnings series for UNP, we’ll look at its overall as well as segmental performances. Finally, we’ll look at analysts’ opinions of the company after its 4Q17 results.