Union Pacific Is 'Weaker Than Expected' And Lagging Behind Peers, Analyst Says

Union Pacific Is 'Weaker Than Expected' And Lagging Behind Peers, Analyst Says

While Union Pacific Corporation’s UNP stock is currently trading at an elevated valuation versus Norfolk Southern Corp NSC and CSX Corporation CSX, the company’s earnings growth could lag peers in the medium-term, according to RBC Capital Markets.

The Analyst: Walter Spracklin downgraded the rating for Union Pacific from Sector Perform to Underperform, while reducing the price target from $200 to $187.

The Thesis: The company’s operating performance is weaker than expected, Spracklin said in the downgrade note.

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Operating trends are “working against UNP (and benefiting NSC)” in the near- to medium-term,” the analyst stated.

"The company has cut its O/R guidance each quarter this year and performance metrics have lagged those reported by peers, with trip plan compliance relatively flat q/ q," Spracklin wrote. "We note that persistent network issues are also driving volume underperformance versus expectations."

“Our view is that network issues will cause EPS growth to lag peers in the medium-term,” the analyst further mentioned.

UNP Price Action: Shares of Union Pacific had risen by 3.71% to $150.71 at the time of publication Tuesday.

Photo by Mike Enerio on Unsplash

Posted In: RBC Capital MarketsWalter SpracklinAnalyst ColorDowngradesPrice TargetAnalyst Ratings