Union Pacific (NYSE: UNP) is scheduled to report its Q3 2022 results on Thursday, October 20. We expect Union Pacific to post revenue and earnings slightly above the street expectations. The company should continue to benefit from a shift toward lower-cost transportation alternatives. Furthermore, our forecast indicates that UNP stock is undervalued at its current levels, as discussed below. Our interactive dashboard analysis of Union Pacific Earnings Preview has additional details.
(1) Revenues expected to be slightly above the consensus estimates
- Trefis estimates Union Pacific’s Q3 2022 net revenues to be around $6.6 billion, reflecting an 18% y-o-y growth and slightly above the $6.4 billion consensus estimate.
- Higher inflation has resulted in some shippers turning to low-cost alternatives, such as railroads. With rising costs, the company should be able to expand its average revenue per carload, boding well for its top-line growth.
- Our dashboard on Union Pacific Revenues has more details on the company’s segments.
- Union Pacific reported a 14% rise in revenue to $6.3 billion in Q2 2022, led by a 16% growth in average revenue per carload, partly offset by a 1% decline in the total volume of carloads.
(2) EPS likely to be slightly above the consensus estimates
- Union Pacific’s Q3 2022 earnings per share (EPS) is expected to be $3.07 per Trefis analysis, slightly above the consensus estimate of $3.05.
- The company’s net income of $1.8 billion in Q2 2022 aligned with its $1.8 billion figure in the prior-year quarter, as higher revenue growth was offset by over 500 bps y-o-y rise in operating ratio to 60.2%.
- For the full-year 2022, we expect the adjusted EPS to be higher at $12.00 compared to the EPS of $9.95 in 2021.
(3) UNP stock looks undervalued
- We estimate Union Pacific’s Valuation to be around $250 per share, which reflects a 30% upside from the current market price of $193.
- At its current levels, UNP stock is trading at just 16x forward earnings, compared to the last three-year average of 22x, making the stock attractive from a valuation point of view.
- Furthermore, if the company reports upbeat Q3 results and provides an outlook better than the street estimates, the P/E multiple will likely be revised upward, resulting in higher levels for UNP stock.
While UNP stock looks undervalued, it is helpful to see how Union Pacific’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
Furthermore, the Covid-19 crisis has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised at how counter-intuitive the stock valuation is for CSX vs. Amerco.
With inflation rising and the Fed raising interest rates, among other factors, UNP stock has fallen 21% this year. Can it drop more? See how low Union Pacific stock can go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.