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On Monday, Stephens analyst Justin Long adjusted the price target for Union Pacific (NYSE:UNP) shares, reducing it to $255 from the previous $275, while continuing to recommend an Overweight rating for the stock. The transportation giant, currently valued at $127.4 billion, trades at $213.29, near its 52-week low of $204.66. According to InvestingPro data, 17 analysts have recently revised their earnings estimates downward, though the company’s Fair Value analysis suggests it remains slightly undervalued. Long’s assessment followed Union Pacific’s first-quarter earnings report, which revealed a lower-than-expected adjusted earnings per share (EPS) despite a significant increase in volumes.
Union Pacific experienced an 18.9% year-over-year growth in intermodal volumes, a key driver behind the stronger volumes. However, an unfavorable mix hindered earnings, as the rise in intermodal led volumes did not translate into proportional profitability. The company maintains impressive gross profit margins of 55.72% and generated $24.25 billion in revenue over the last twelve months. Despite these challenges, Union Pacific has made strides in its operational expenditure (OpEx) initiatives, achieving a 6.3% reduction in OpEx per carload.
The company is expected to continue improving efficiency, which could be particularly beneficial if volumes begin to decline. Looking ahead, Long anticipates headwinds for volumes starting in May, as international intermodal activity slows down. This slowdown, however, might be partially mitigated by a positive mix shift and stronger coal volumes observed quarter-to-date.
Another highlight from Union Pacific’s quarterly report was the company’s pricing power. For the second consecutive quarter, pricing contributed positively to the operating ratio (OR), indicating robust underlying pricing strength. Long believes that this pricing momentum will become more apparent as the mix improves throughout the year.
Despite the potential for Union Pacific’s shares to remain within a certain range in the short term due to uncertainties surrounding imports, Long sees an attractive risk/reward profile at the new price target. Trading at a P/E ratio of 19.21, the stock presents interesting opportunities for value investors. The Overweight rating is maintained, reflecting confidence in the company’s prospects, notwithstanding the absence of immediate catalysts to propel the stock. For deeper insights into Union Pacific’s valuation and growth prospects, including exclusive ProTips and comprehensive financial analysis, visit InvestingPro, where you’ll find detailed research reports and expert commentary on this prominent player in the Ground Transportation industry.
In other recent news, Union Pacific Corporation reported its first-quarter earnings for 2025, revealing a slight miss on both earnings per share (EPS) and revenue forecasts. The company posted an EPS of $2.70, falling short of the expected $2.76, while revenue reached $6.03 billion, missing the forecasted $6.10 billion. Despite these results, Union Pacific highlighted strong volume growth and infrastructure investments, with improvements in workforce and locomotive productivity. The company also maintained its three-year EPS compound annual growth rate (CAGR) target of high single to low double digits and set a share repurchase target of $4-4.5 billion for 2025.
In other developments, Loop Capital updated its outlook on Union Pacific shares, slightly raising the price target to $202 from $200 but maintaining a Sell rating. Analyst Rick Paterson cited concerns over the impact of tariffs on the company’s operations, which are expected to dampen rail volumes in the near term. These recent developments reflect the challenges Union Pacific faces, particularly regarding external economic policies and trade tensions. Despite the earnings miss, Union Pacific remains focused on pricing strategy and operational excellence, as highlighted by its leadership during the earnings call.
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