Union Pacific Corp. (UNP) reports Q4 2020 earnings in Thursday’s pre-market, with analysts expecting a profit of $2.23 per-share on $5.12 billion in revenue. If met, earnings-per-share (EPS) will mark a 10% profit increase compared to the same quarter in 2019. The stock sold off more than 6% in October after missing Q3 top and bottom line estimates, and fell another 6% into month’s end. However, it’s recovered since that time and is now trading at an all-time high.
Union Pacific Raises Guidance
This is America’s largest railroad, with 32,340 route miles linking the Pacific and Gulf coasts and Great Lakes. The company issued upside guidance on Jan. 8 and now expects to report revenue of $5.1 billion, compared to prior estimates of $5.06 billion. It also projects an adjusted operating ratio of 55.6%, marking a 4.1 point improvement over the same quarter in 2019. The stock rallied 3.4% after the news, breaking out to a new high.
United Pacific is the highest capitalized component in the Dow Jones Transportation Average, with a $146 billion market cap about $5 million higher than runner-up United Parcel Service Inc. (UPS). The stock posted a modest 14% return in 2020, which was enough to lift the Average above 3-year resistance to an all-time high. UNP price action is highly vulnerable to economic cycles, which impact shipping volume carried across the rails.
Wall Street and Technical Outlook
Wall Street consensus is mixed, with a ‘Moderate Buy’ rating based upon 11 ‘Buy’, 6 ‘Hold’, and 0 ‘Sell’ recommendations. Price targets currently range from a low of $160 to a Street-high $250 while the stock opened Tuesday’s U.S. session about $3 below the median $222 target. The pre-announcement triggered just one upgrade but more could follow if Q4 earnings-per-share also exceeds current expectations.
Union Pacific has been grinding higher since 2017 when it broke out above 2015 resistance near 125. Price action since September 2018 has tracked a rising highs trendline that’s now come back into play for the third time. This tells sidelined investors the reward-to-risk profile isn’t favorable, unless a bull surge generates a trendline breakout. The sky’s the limit if that happens, opening the door to 300 and beyond.
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Disclosure: the author held no positions in aforementioned securities at the time of publication.