Union Pacific Signals Low
Union Pacific (UNP) operates 31,974 miles of Class I railroads in the United States. They link 23 states in the western two-thirds of the country by rail.
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Union Pacific is a shrewd operator that has the advantage of serving the fast-growing population centers in the US Midwest and the West Coast.
UNP track connects with the Canadian rail system and is the only operator that serves the major gateways to Mexico. These advantages help it to maintain pricing power and generate high profits. UNP’s profitability beats almost every other industrial company in the Fortune 500.
Earnings are expected to continue growing but the shares have fallen 23% from their high point and are now attractively valued. We also considered CN Rail, but ultimately favored the better track record of UNP.
Purple Chips 12 -18 month target: $109.00
LOW VALUATION IN UNION PACIFIC AT $95.89 (UNP-US) FULL POSITION
PURPLE CHIPS TARGET: $109.00 POSITION SIZE: FULL (5.0%) P/E: 16.2X DIV: $2.20 (2.3%) MKT CAP: $83.9B Debt:$10B RETURN ON CAPITAL: 18.9% EARNINGS YIELD: 9.6% 5 YR EPS Growth rate*:21.0% P/E/G Ratio: 0.78X EPS: $5.87 2016 EST.: $6.87 2017 EST.: $7.81
*Blended growth rate= 2/3 historical (5yrs), 1/3 forward.
