Union Pacific Upgraded To Outperform

Wells Fargo has upgraded Union Pacific Corporation (NYSE: UNP) to Outperform following results that Wells Fargo found impressive for 3Q.In the report, Wells Fargo writes "We think UNP produced results that demonstrate how pricing discipline and productivity initiatives can create attractive earnings growth even in a lackluster economic environment. As we believe these factors are sustainable, we are raising our rating to Outperform and our 2010E EPS to $5.40 from $5.13 and 2011E to $6.31 from $5.96. Our valuation range climbs to $95-101 on our higher estimates and a bump in target multiples. Our downgrade was based in part on our concern that moderating volume growth would curtail further meaningful earnings leverage. That was not the case in Q3 results where EBIT improved 10% sequentially on a 6% sequential gain in carloads. Various productivity initiatives and accelerated "core" pricing gains drove the results, and renew our confidence in the margin outlook. While an EPS beat was likely anticipated ($1.56A vs. $1.42E, Street at $1.50) after the strong report by CSX, we do not believe the earnings power of UNP is yet fully appreciated."Union Pacific Corporation closed yesterday at $84.96.