Union Pacific Earnings: an Early Look

With hundreds of companies having already reported quarterly results, we're now in the heart of earnings season. The key to making smart investment decisions with stocks releasing their quarter reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Let's turn to Union Pacific (NYSE: UNP  ) . The railroad company has had several years of success, as high energy prices made it more efficient to transport goods by train. Yet a slowdown in global growth has challenged the entire industry. Let's take an early look at what's been happening with Union Pacific over the past quarter and what we're likely to see in its quarterly report on Thursday.

Stats on Union Pacific

Analyst EPS Estimate

$2.16

Change from Year-Ago EPS

8.5%

Revenue Estimate

$5.31 billion

Change from Year-Ago Revenue

3.9%

Earnings Beats in Past 4 Quarters

4

Source: Yahoo Finance.

Will Union Pacific keep on movin'?
Analysts appear fairly certain about Union Pacific's modest growth in the fourth quarter. Although estimates have fallen slightly in the past few months, the company has a good track record of topping those estimates when it releases actual results. The stock has also done fairly well, rising 6% since mid-October.

The biggest challenge that many railroads have had to face lately is the drop in worldwide coal demand. Between U.S. electricity generation companies switching to low-priced cleaner-burning natural gas over coal and Chinese manufacturing facing a slowdown, coal-heavy railroads CSX (NYSE: CSX  ) and Norfolk Southern (NYSE: NSC  ) have had to deal with a loss of revenue in a particularly important segment. By contrast, Union Pacific isn't as dependent on coal and therefore hasn't seen as big an impact.

Moreover, Union Pacific has tapped into a potentially more lucrative business: petroleum transport. Both it and Canadian National Railway (NYSE: CNI  ) have capitalized on inadequate pipeline infrastructure in hot areas like the Bakken Shale, and producers like Continental Resources have had little choice but to resort to rail transport for the bulk of its energy production from the region.

Beyond headline earnings figures and guidance, investors should be on the lookout in the coming report for signs that Union Pacific might accelerate its dividend growth. Despite having pushed its payout up 15% in November, the company still pays out only about a third of its earnings in producing a 2% yield, leaving plenty of room for further increases. If it does, then the shares could move up even further from their current levels.

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