Will Volume Growth Aid Union Pacific's (UNP) Q4 Earnings?
Union Pacific Corporation UNP is slated to release fourth-quarter 2017 results on Jan 25 before the market opens.
Last quarter, the company delivered a positive earnings surprise of 0.7%. Also, the company has an impressive earnings history, having surpassed the Zacks Consensus Estimate in each of the preceding four quarters with an average beat of 4.4%.
Let’s see what awaits the company in the fourth quarter.
Why a Likely Positive Surprise?
Our proven model shows that Union Pacific is likely to beat on earnings this quarter too for comprising the perfect combination of two key ingredients.
Zacks ESP: Union Pacific has an Earnings ESP of +0.47%, representing the difference between the Most Accurate estimate, which stands at $1.55 per share and the Zacks Consensus Estimate, pegged lower at $1.54. A positive Zacks ESP indicates a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Union Pacific carries a Zacks Rank #2 (Buy), which increases the predictive power of USP. Note that the stocks with a favorable Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) have significantly higher chances of beating estimates.
Conversely, the Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement, especially when the company is witnessing negative estimate revisions.
Union Pacific Corporation Price and EPS Surprise
Union Pacific Corporation Price and EPS Surprise | Union Pacific Corporation Quote
What is Driving This Better-than-Expected Earnings?
Volume growth should aid Union Pacific's results in the fourth quarter of 2017. Growth at the key segments like intermodal and chemicals should drive the overall results. The Zacks Consensus Estimate for intermodal revenues stands at $1,013 million, higher than the year-ago reported base of $969 million. The same for chemicals is pegged at $888 million, above the reported base of $857 million in December 2016. Moreover, the company’s cost-cutting efforts should benefit its bottom line in the quarter.
The company’s initiatives to reward investors through share buybacks and dividend payouts are also impressive. In November 2017, the company raised its quarterly dividend to 66.5 cents per share ($2.66 annualized), representing an increase of 10% over the previous payout.
Shares of the company have outperformed the industry it belongs to in the last three months on the back of above tailwinds. The stock has rallied 24.8% compared with the industry’s 11.8% gain.
However, the company’s automotive unit has been suffering for quite some time due to sluggish vehicle production in the United States. This seems to affect results in the fourth quarter as well.
Other Stocks to Consider
Investors also interested in a few other stocks worth considering from the broader Transportation sector may check out Allegiant Travel Company ALGT, SkyWest, Inc. SKYW and Atlas Air Worldwide Holdings AAWW as these possess the right combination of elements to beat estimates in their next releases this time around.
Allegiant has an Earnings ESP of +1.09% and a Zacks Rank #3. The company will release fourth-quarter earnings numbers on Jan 31.
SkyWest has an Earnings ESP of +7.80% and a Zacks Rank of 1. The company is scheduled to report fourth-quarter results on Feb 1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Atlas Air Worldwide has an Earnings ESP of +2.16% and a Zacks Rank of 3. The company is expected to announce fourth-quarter earnings figures on Feb 22.
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