Meetings with senior management at Union Pacific Corporation’s (NYSE: UNP) highlighted that, although there is increased downside risk to 2019 volume expectations, the company’s efficiency improvement initiatives are on the right track and remain in their early stages, according to BMO Capital Markets.
Union Pacific has significant network capacity opportunities and will operate at low capital intensity as well as higher FCF and ROIC in the coming years, Chamoun said in the Wednesday note. (See his track record here.)
The company is making progress in enacting its Unified Plan 2020, the analyst said. Union Pacific could achieve cost savings of more than $2 billion in the medium term versus its initial target of $500 million for 2019, he said.
“We sense that despite the weaker-than-expected volumes and weather challenges, management remains confident in achieving the above-noted 2019 cost savings target."
While Union Pacific’s network is handling significantly lower carloads per week than the highest it achieved in the past 10 years, network efficiency is improving and freeing up incremental capacity, Chamoun said.
This could support higher FCF and ROIC, which the company expects to distribute to shareholders, the analyst said, adding that the ongoing network transformation “should help energize growth.”
Union Pacific shares were down 2.38% at $167.15 at the close Thursday.
A Peek Into The Markets: US Stock Futures Signal Higher Start On Wall Street
U.S. Weekly Rail Traffic Slumps 8.5 Percent
Photo by Bruce Fingerhood/Wikimedia.
Latest Ratings for UNP
|Apr 2019||Maintains||Strong Buy||Strong Buy|
View More Analyst Ratings for UNP
View the Latest Analyst Ratings
See more from Benzinga
- KeyBanc Hikes Atlassian Price Target, Sees Potential For Sustained 30% Subscription Revenue Growth
- MKM Partners Out Bullish On WPX Energy, Surveys Oil Exploration Company's Inventory
- Farfetch Launches On JD.com, Analysts Bullish On China Prospects
© 2019 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.