Cowen & Company Ups Union Pacific To Outperform

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In a research note out Monday, analyst Jason H. Seidl of Cowen & Company upgraded shares of
Union Pacific Corporation
UNP
to Outperform from Market Perform and lowering the price target from $117 to $111, feeling that further stock price downside is limited. Seidl states that with UNP shares down nearly 19 percent year-to-date and 15 percent since March, and with expectations about to be largely reset to reflect traffic weakness, long-term investors should view this as a unique opportunity to own a high-quality rail. The analyst points out that the shares are now trading at 14x 2016 consensus EPS, a 15 percent discount to the historical multiple. He goes on to say that even if traffic remains at current levels, the railroads should be able to push through compensatory rate increases as they did during the great recession.Investors' eyes will likely turn to 2016 when easier traffic comparisons, improving service measures and continued share repurchases should aid earnings growth for UNP and the rest of the rail sector. Seidl further states, "UNP is one of the best managed North American Class I railroads and the only western one that is publicly traded. While traffic continues to decline, further weakness is limited from this point, in our opinion, as most natural gas switching has already occurred, and y/y comparisons become less difficult in 2H15. We rate UNP Outperform." Shares closed lower by 0.43 percent at $96.24, implying 15.33 percent upside to the new price target.
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Posted In: Analyst ColorUpgradesPrice TargetAnalyst RatingsCowen & CompanyJason H. Seidl
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