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Based on Union Pacific Corporation’s (NYSE:UNP) earnings update on 31 December 2018, analyst forecasts seem fairly subdued, with profits predicted to rise by 7.9% next year compared with the higher past 5-year average growth rate of 17%. Presently, with latest-twelve-month earnings at US$6.0b, we should see this growing to US$6.4b by 2020. Below is a brief commentary around Union Pacific’s earnings outlook going forward, which may give you a sense of market sentiment for the company. Investors wanting to learn more about other aspects of the company should research its fundamentals here.
Exciting times ahead?
The longer term expectations from the 25 analysts of UNP is tilted towards the positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. I’ve plotted out each year’s earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of UNP’s earnings growth over these next few years.
This results in an annual growth rate of 7.1% based on the most recent earnings level of US$6.0b to the final forecast of US$7.4b by 2022. This leads to an EPS of $11.62 in the final year of projections relative to the current EPS of $7.95. In 2022, UNP’s profit margin will have expanded from 26% to 29%.
Future outlook is only one aspect when you’re building an investment case for a stock. For Union Pacific, I’ve put together three key aspects you should further examine:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is Union Pacific worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Union Pacific is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Union Pacific? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.