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Last week, you might have seen that Union Pacific Corporation (NYSE:UNP) released its full-year result to the market. The early response was not positive, with shares down 4.4% to US$207 in the past week. It was a credible result overall, with revenues of US$20b and statutory earnings per share of US$7.88 both in line with analyst estimates, showing that Union Pacific is executing in line with expectations. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Taking into account the latest results, the consensus forecast from Union Pacific's 24 analysts is for revenues of US$21.0b in 2021, which would reflect a modest 7.5% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to surge 21% to US$9.56. In the lead-up to this report, the analysts had been modelling revenues of US$21.1b and earnings per share (EPS) of US$9.55 in 2021. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
It will come as no surprise then, to learn that the consensus price target is largely unchanged at US$227. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Union Pacific, with the most bullish analyst valuing it at US$250 and the most bearish at US$169 per share. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's clear from the latest estimates that Union Pacific's rate of growth is expected to accelerate meaningfully, with the forecast 7.5% revenue growth noticeably faster than its historical growth of 0.3%p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 9.7% per year. So it's clear that despite the acceleration in growth, Union Pacific is expected to grow meaningfully slower than the industry average.
The Bottom Line
The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Union Pacific's revenues are expected to perform worse than the wider industry. The consensus price target held steady at US$227, with the latest estimates not enough to have an impact on their price targets.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Union Pacific going out to 2025, and you can see them free on our platform here.
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Union Pacific , and understanding this should be part of your investment process.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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