Union Pacific Corporation (NYSE:UNP) — This is the largest railroad in the United States, with over 32,000 miles of track serving two-thirds of the country.
Despite the overall hardships in the industry and a mild shortfall in Q1 earnings on a volume slowdown that was at least partly related to the harsh winter, S&P Capital IQ forecasts earnings will increase 11% in 2015 to $6.39 per share. But a larger-than-expected grain harvest, stabilization in coal shipments and an increase in the production of crude oil could make this projection conservative. Capital IQ has a “buy” rating on UNP stock and a 12-month price target of $137.
Credit Suisse analysts note Union Pacific has historically done a better job than its competitors of marching resources with demand. Its analysts have a price target of $123 on UNP stock and rate shares “outperform.”
UNP stock formed the second peak of a double-top at about $123 in late February and has since fallen to a possible triple-bottom at $98. After a three-month decline, selling may have reached a crescendo. On Thursday, shares issued a MACD buy signal for the first time since early April.
Admittedly, UNP stock is still in an intermediate downtrend, but a support line drawn from the April 2014 low near $89 connects nicely to the current triple-bottom.
Those seeking a blue-chip bargain should buy UNP stock at the current price with a 12-month price objective of $120. This would result in a return of almost 18%, in addition to the stock’s 2.2% dividend yield.
