Union Pacific Gets Ridiculous Price Target (UNP)

Union Pacific UNP received a nice upgrade this morning from Robert W. Baird. The firms sees Union Pacific trading to $120, which is roughly 30 percent higher from today's price of $92. Baird says Union Pacific remains its favorite rail company and sees sustainable margin improvement, a favorable industrial freight market, and a more favorable regulatory environment. Baird raised its rating on the stock to Outperform from Neutral. While I believe the rails are a solid long-term investment with excellent fundamentals and economic 'moats', they are not exactly cheap at these levels. Union Pacific trades for 18 times current earnings and 14.4 times next year's earnings. The company would need to see significant growth in margins or revenues to justify a higher p/e ratio. We all know analysts tend to upgrade stocks at their respective peaks and downgrade them at their troughs. Union Pacific is trading just above its all-time high set in 2008 and is up roughly 25 percent in the last 3 months alone. For investors looking to play the rails and Union Pacific specifically, patience my be warranted at such levels.