Yesterday in Wednesday’s trading session, Union Pacific (UNP) gained more than 12% after news of the railroad operator’s new CEO taking the helm. The buzz over Jim Vena taking the reins of the company managed to steal the spotlight from what ended up being a quarter of underperformance.
During the second quarter, the railroad operator watched revenue recline nearly 5% to $5.57 billion, well below the analyst estimate of $6.09 billion. Meanwhile, net income slipped to $1.57 billion ($2.57/share) compared to $1.84 billion ($2.93/share) this time last year. The EPS disappointed analysts and shareholders as it was under the FactSet consensus of $2.47.
Current CEO – Lance Fritz – has been leading the company for more than 8 years now. His departure is scheduled for August 14 at which point Vena will take over. But, Fritz took the time to comment on the company’s performance one last time.
He says that the poor performance for the quarter can be attributed to weakened consumer markets, inflation, a one-time labor expense, and an increase in workforce levels. The outlook for the full year is being challenged by both softened demand and rising cost – a perfect storm.
Nevertheless, the company expects to fall just short of forecasts for the year as far as volume goes. It’ll be interesting to see how the company finishes out the year under its new leader. Vena was COO from 2019-2020 before taking a leave of absence, and it’s clear his return has sparked excitement in the market.
That being said, it looks as if investors finally realized that yesterday’s news wasn’t all positive. So far in Thursday’s trading session, UNP stock is down 2.25%. Still, the trend for the past few months has been promising – up 22% in the past 3 months.
All that being said, should you ride the hype of Vena’s appointment as CEO – or should you be concerned about the trajectory this company is on from an earnings/financials standpoint?
We can help you tune out the noise and focus on what matters most to make your next move with clarity and confidence. Below, we’ve highlighted 3 things you need to see, which we uncovered through the Vectorvest stock analyzer.
Despite Disappointing Earnings, UNP Still Has Fair Upside Potential and Safety with Good Timing
The VectorVest system simplifies your trading strategy by giving you clear, actionable insights in just 3 ratings: relative value (RV), relative safety (RS), and relative timing (RT). Each of these sits on a scale of 0.00-2.00, with 1.00 being the average - allowing for quick and easy interpretation.
But it gets even easier - because based on the overall VST rating for a given stock, the system offers a clear buy, sell, or hold recommendation based on real-time data. As for UNP, here’s what we’ve found:
- Fair Upside Potential: The RV rating of 0.99 is just below the average, but considered fair nonetheless. It’s a comparison between the stock’s long-term price appreciation potential (forecasted three years out) and AAA corporate bond rates & risk. At its current price, UNP is fully valued.
- Fair Safety: In terms of risk, UNP is a fairly safe stock - backed up by the RS rating of 0.99. This rating is calculated through an analysis of the company’s financial consistency & predictability, debt-to-equity ratio, and business longevity.
- Good Timing: The best thing UNP has going for it right now is the strong positive price trend that’s held over the past few months, and that was bolstered by yesterday’s 12% gain. The RT rating of 1.16 is good, and is based on the direction, dynamics, and magnitude of the stock’s price movement. It’s taken day over day, week over week, quarter over quarter, and year over year.
The overall VST rating of 1.06 is considered fair, but is it enough to justify buying UNP? Or, should you wait for better earnings in the next quarter before jumping in?
A free stock analysis awaits you at VectorVest where you can gain a clear buy, sell, or hold recommendation. Get yours today - you’re not going to want to miss this opportunity!
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VectorVest advocates buying safe, undervalued stocks, rising in price. While UNP earnings disappointed, the appointment of its new CEO stole the spotlight - sending shares 12% higher yesterday. The stock currently has fair upside potential and safety with good timing.
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