Union Pacific Has Opportunities To Offset Growth Challenges, Says Analyst

Raymond James analyst Patrick Tyler Brown reiterated a Strong Buy rating on the shares of Union Pacific Corporation UNP and raised the price target from $225 to $230.
The analyst said the company's Q1 revenue of $6.056 billion was in line with the consensus estimate, whereas Q1 EPS of $2.59 was slightly below the Street view.
The analyst noted that revenue growth was driven by gains from surcharges and core pricing while partially offset by mix and volume declines.
The analyst added that volumes were challenged due to weather disruptions, particularly in California (wet) and the Midwest.
The analyst said it is clear that the macro narrative deteriorated compared to 90 days ago.
That said, the analyst was impressed by the company's reiteration of guidance. But the management also clarified that the guidance excludes the condition of recession.
While 1Q was mired in setbacks handed down by mother nature, the company was confident in future service improvements given its strong employee backlog, said the analyst.
Opportunities, the analyst pointed, remain in pricing (above unit cost dollars), cost control, and productivity benefits.
The analyst believes the company is still relatively early in the precision scheduled railroading (PSR) implementation process and provides opportunities to more than offset current carload growth challenges.
Longer term, once PSR is more fully implemented, the analyst expects volume growth will return as UP's superior service product attracts organic and market share takeaway opportunities.
Also Read: These Analysts Revise Price Targets On Union Pacific After Q1 Results
Price Action: UNP shares are trading lower by 1.73% at $199.09 on the last check Friday.

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