Union Pacific's Stock: Down 11%, Beating the S&P500 by 6%.
This year, Union Pacific stock has fallen 11%, which is slightly better than the performance of the S&P500 index, which is down 17%.
Looking at Union Pacific stock, it's clear that the current market conditions are having a negative impact on the company. With the economy slowing down and inflation rising, Union Pacific is feeling the pressure. However, it's important to remember that the demand for railroad services is linked to economic growth. So, even though things are tough right now, Union Pacific could still see positive results in the future.
Looking at the longer term, I'm bullish on UNP stock. I believe the stock is undervalued and has significant upside potential. The company is a leader in the railroad industry and has a strong competitive position. I believe the stock is a good long-term investment.
Looking at Union Pacific's recent stock performance, it's clear that the company is doing well. The P/S ratio rising 19% to 6.0x trailing revenues is one of the primary reasons for the stock's 67% since late 2017. Additionally, Union Pacific's revenue growth of 10% to $23.4 billion over the last twelve months has contributed to the stock's success. Finally, the 22% fall in the company's total shares outstanding has also helped bolster Union Pacific's revenue per share metric, which is now at $37.45.
Looking ahead, Union Pacific expects continued growth in average freight revenue per carload, offsetting a decline in the total number of carloads. This will result in continued revenue growth for the company, despite challenges in the overall economy. Union Pacific remains confident in its ability to navigate these challenges and continue growing its business.
It is heartening to see the company rebound in railroad demand. The semiconductor chip shortage and supply chain disruptions in the automotive industry had weighed on overall production, however coal has positive momentum on its side. With rising production in the U.S. and increased global demand due to higher natural gas prices, we are seeing a solid 31% increase in coal and renewable revenue. This is driven by a 15% rise in volume and a 14% jump in average revenue per carload. We are hopeful that this trend will continue in the coming months and years.
Union Pacific's operating ratio is expected to improve in the second half of 2022 as inflation begins to ease. This will be a positive development for the company, which has been struggling to keep its operating ratio down in recent years.
We believe that Union Pacific is currently undervalued by the market, and that the stock has potential to rise by 11% to reach our estimated target price of $250 per share. The company has strong fundamentals, including a history of reducing its operating ratio and returning substantial value to shareholders through share buybacks. Even though the stock is trading at a slightly higher multiple than in 2017, we believe this is justified given the company's strong track record and outlook.
While UNP stock looks like it has some more room for growth, it is helpful to see how Union Pacific’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
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With inflation rising and the Fed raising interest rates, among other factors, UNP stock has fallen 11% this year. Can it drop more? It is difficult to say how low Union Pacific stock can go in a market crash, as there are many factors at play. However, looking at the performance of all stocks in previous market crashes can give us some insight. Generally speaking, stocks tend to fall sharply during market crashes. In the most recent market crash in 2008, the S&P 500 index fell by over 50%. So, it is not out of the realm of possibility that Union Pacific stock could fall by a similar amount. Of course, it is also worth noting that every market crash is different, and so it is possible that Union Pacific stock could fare better or worse than the overall market.
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