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Union Pacific Blows Through Estimates


Parsad
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While I couldn't care one iota about analyst reports or estimates, it is interesting to see Union Pacific's numbers increase dramatically.  I sure would like to see how the other railroads are doing and the number of carloads they are carrying...methinks things are starting to pick up slowly.  Cheers!

 

http://blogs.barrons.com/stockstowatchtoday/2010/07/22/union-pacific-q2-eps-blows-away-estimates-longbow-raises-target/?mod=yahoobarrons

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I think most of the transports and service-related transports have gotten pretty undervalued. I started a position in Federal Express recently, but it stock went up a decent amount before I added to my position. Hoping it comes back down a bit. I've been watching UNP and CNI closely as well but haven't pulled the trigger on them.

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CN Rail did EXTREMELY well...

 

http://www.cn.ca/en/media-news-q2-financials-20100722.htm

 

CN Rail:

 

Second-quarter 2010 highlights:

-Net income and diluted earnings per share (EPS) increased by 38 per cent from the year-earlier quarter to C$534 million and C$1.13, respectively.

-Diluted EPS of C$1.13 increased by 49 per cent over adjusted diluted EPS of C$0.76 for the second quarter of 2009. (1)

-Revenues rose 18 per cent to C$2,093 million, while carloadings increased 27 per cent and revenue ton-miles rose 15 per cent.

-Operating income increased 39 per cent to C$813 million.

-Operating ratio improved by 6.1 points to 61.2 per cent.

-Six-month free cash flow totalled C$958 million, up from C$463 million generated during the comparable period of 2009. (1)

 

While I couldn't care one iota about analyst reports or estimates, it is interesting to see Union Pacific's numbers increase dramatically.  I sure would like to see how the other railroads are doing and the number of carloads they are carrying...methinks things are starting to pick up slowly.  Cheers!

 

http://blogs.barrons.com/stockstowatchtoday/2010/07/22/union-pacific-q2-eps-blows-away-estimates-longbow-raises-target/?mod=yahoobarrons

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I understand the economic excitement around rail companies moving around more goods, but their stocks seem to reflect a lot of good news.

 

CN for example is trading at 15.7 times their revised 2010 EPS forecast of $4.05. If you want to factor growth in the equation, it is trading at 12.0 times 2012 EPS forecast of $5.30 (who is ultra confident in their 2 year forecast?). The dividend yield is 1.7%. 

 

These are not cheap multiples for companies that are cyclical and actually always investing more in capex than their depreciation. So the real P/E is actually higher since most of this capex is maintenance. Also, keep in mind that these earnings forecasts are actually a near best case scenario. They never factor in disruptions which always tend to occur.

 

If the growth in earnings materializes you have a compounded return of 16% including the dividend over a 2 year period assuming the same P/E as today. It is good, but there must be stronger returns available out there if the economy strengthens per these earnings forecasts.

 

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Each time I spend time with the 10K's and 10Q's of the railroads I get more surprised at how much this business is changing and how profitable it is with the slightest bit of volume increase.

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