Jefferies Starts Union Pacific (UNP) at Hold

Jefferies analyst Stephanie Moore initiates coverage on Union Pacific (NYSE: UNP) with a Hold rating and a price target of $250.00.

The analyst comments "UNP is the largest publicly traded Class 1 railroad in North America and, depending on volume or revenue, is the #1 or #2 largest Class 1 overall along with BNSF. With most of the Class 1 railroads having converged on service and margins/returns, UNP is widely considered a high-quality operator. Relative to its West Coast competitor BNSF, UNP has a margin profile that is over 500bps better. With its size, relatively low capital intensity, and above-peer margin profile, UNP has historically returned the most cash to shareholders via its dividend and share repurchases. With all of this said, given UNP's industry-leading margin, we are skeptical that it can see the same level of OR margin expansion over the next five years, and we think UNP is approaching the sustainable OR floor of 55%-60% (2023 OR of 62%). With shares at the high end of its historic range and fully discounting volume growth, a 10% EPS CAGR over the next two years, we see shares as fully valued and think there's risk of multiple contraction towards its long-term average as the limited margin improvement opportunity becomes realized."

For an analyst ratings summary and ratings history on Union Pacific click here. For more ratings news on Union Pacific click here.

Shares of Union Pacific closed at $242.01 yesterday.

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