UNP - Embedded Expectations Analysis - 2019 05 21
Union Pacific Corporation (UNP:USA) currently trades above recent averages relative to UAFRS-based (Uniform) Earnings, with a 21.5x Uniform P/E, implying bullish expectations for the firm. However, management has concerns about their ability to restore weather-impacted services, increase bulk and track length capabilities, and sustain productivity improvements, specifically in locomotives.Specifically, management may be concerned about wage inflation, the potential for terminal changes, and their ability to restore weather-impacted services. Moreover, they may lack confidence in their ability to sustain productivity improvements, increase bulk and track length capabilities, and reduce headcount while increasing volume. Also, they may be exaggerating their ability to improve locomotive productivity by decreasing touch points and the fluidity of their Houston operations. Finally, they may be concerned about retirement and contract change headwinds, customer inventory levels in the West Coast, and their ability to sustain share buybacks.
Union Pacific, through its operating subsidiary, Union Pacific Railroad Company, is a Class I railroad operating in the United States. The company's network included route miles, linking Pacific Coast and Gulf Coast ports with the Midwest and eastern United States. gateways and providing several corridors to key Mexican gateways. The company serves the western two-thirds of the country and maintains coordinated schedules with other rail carriers for the handling of freight to and from the Atlantic Coast, the Pacific Coast, the Southeast, the Southwest, Canada, and Mexico. The company's business mix includes agricultural products, energy, industrial, and premium.
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