Union Pacific Slips 5% On Weak 4Q Freight Revenues

Shares of Union Pacific Corporation fell 4.7% on Thursday after the freight-hauling railroad company posted a decline in 4Q revenues due to lower freight revenues. Nevertheless, its 4Q revenues and earnings topped the Street’s estimates.

Union Pacific’s (UNP) 4Q earnings of $2.36 per share jumped 16.8% year-over-year and beat analysts’ expectations of $2.22 per share. Its revenues of $5.14 billion exceeded the consensus estimates of $5.08 billion but declined 1% year-over-year.

The company’s freight revenues took a hit, reflecting unfavorable business mix and lower fuel surcharge revenues. However, volume growth and an increase in core pricing supported the freight revenues in 4Q. Notably, a 7% decline in the Industrial category more than offset the growth in Bulk and Premium categories. (See UNP stock analysis on TipRanks)

Union Pacific reported an operating ratio of 55.6%, which improved by 410 basis points year-over-year due to the lower fuel prices.

As for 2021, the company’s CEO Lance Fritz said, “We expect our enhanced service product will support both solid core pricing gains while also increasing our share of the freight transportation market.”

Earlier on Jan. 15, Raymond James analyst Patrick Brown raised the stock’s price target to $250 (20.3% upside potential) from $220 and maintained a Buy rating. In a note to investors, the analyst said that he remains “enamored” with the company’s faster-than-anticipated implementation of Precision Scheduled Railroading. He believes that the changes in the network will yield profits.

Meanwhile, the analyst consensus of a Moderate Buy is based on 12 Buys and 6 Holds. The average analyst price target of $223.59 implies upside potential of about 7.6% to current levels. Shares gained 14.6% in the last year.

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