- Benchmark analyst Nathan P. Martin reiterated a Buy rating on the shares of Union Pacific Corporation UNP and raised the price target from $255 to $270.
- The analyst has trimmed the Q4 EPS estimate from $2.68 to $2.61 as an increase in RPU assumption isn’t fully able to offset weaker volumes and higher expenses.
- Based on AAR data, the analyst estimates UNP’s carloads were down ~3% y/y in Q4 compared to the prior assumption of flat.
- On a segment-by-segment basis, the analyst estimates metals & minerals (+15%), coal & renewables (+14%), fertilizer (+9%), and forest (+8%) led the way.
- The analyst said that more than offset these gains were declines in premium segment volumes, including an estimated 15% drop in autos as the chip shortage persists and a 12% decrease in intermodal traffic.
- As for RPU, the analyst now models 12% y/y growth versus 9% previously on favorable pricing, fuel surcharge, and elevated assessorial charges.
- On the expense side, the analyst models a slight increase in average headcount based on STB data.
- The analyst now assumes full-year volume is up 4%, in line with UNP’s target that was revised down last month from 5% to about 4% growth.
- The analyst believes UNP remains well positioned to achieve its 55.x% full-year 2022 OR target as demand remains strong and supply chain congestion gradually improves.
- The analyst expects the company will likely provide more specific guidance when it reports Q4 results.
- Price Action: UNP shares are trading higher by 0.02% at $214.30 on the last check Thursday.
- Photo Via Company
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