Union Pacific (NYSE: UNP) is scheduled to report its Q4 2022 results on Tuesday, January 24. We expect Union Pacific to post mixed results, with revenue below and earnings above the street expectations. The company should continue to benefit from a shift toward lower-cost transportation alternatives. However, our forecast indicates that UNP stock has little room for growth, as discussed below. Our interactive dashboard analysis of Union Pacific Earnings Preview has additional details.
(1) Revenues expected to be slightly below the consensus estimates
- Trefis estimates Union Pacific’s Q4 2022 net revenues to be around $6.2 billion, reflecting a 9% y-o-y growth and slightly below the $6.3 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 an 18% rise in revenue to $6.6 billion in Q3 2022. Its freight revenues were up a solid 18%, led by a 15% growth in average revenue per carload and a 3% rise in the total volume of carloads.
(2) EPS likely to be above the consensus estimates
- Union Pacific’s Q4 2022 earnings per share (EPS) is expected to be $2.92 per Trefis analysis, well above the consensus estimate of $2.80.
- The company’s net income of $1.9 billion in Q3 2022 reflected a 13% rise from its $1.7 billion figure in the prior-year quarter. Higher revenue growth was partly offset by over 360 bps y-o-y rise in operating ratio to 59.9%.
- For the full-year 2023, we expect the adjusted EPS to be higher at $12.60 compared to the EPS of $9.95 in 2021 and an estimated $11.61 in 2022.
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(3) UNP stock looks reasonably valued
- We estimate Union Pacific’s Valuation to be around $232 per share, which reflects only an 8% upside from the current market price of $214.
- Our forecast is based on an 18x forward earnings estimate of $12.60, compared to the last three-year average of 22x.
- We have assigned a slightly lower multiple for railroad stocks, given the rising operating ratio and concerns of slowing economic growth.
- However, if the company reports upbeat Q4 results and provides a 2023 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 appropriately priced, 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 10% in the last twelve months. 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.
|S&P 500 Return||4%||4%||78%|
|Trefis Multi-Strategy Portfolio||9%||10%||245%|
 Month-to-date and year-to-date as of 1/18/2023
 Cumulative total returns since the end of 2016