Did you manage to hitch your financial caboose to Union Pacific in late March? If you did you're up 32.5%. True, the 'UNP Express' is leaving the station, so this represents perhaps you're last chance for an out-sized gain with UNP. Hence, I'm Reiterating my Buy rating for Union Pacific (NYSE: UNP), first recommended on March 27, 2009 at a price of $43.00.
Union Pacific is the leading rail freight carrier in the United States, transporting coal, chemicals, industrial products and freight over an enormous track network: 32,000 miles of route track in 23 states in the western U.S.
More cost-cutting efforts should provide an additional tailwind for shares, which have seen steady, incremental interest from institutional investors, who have been bidding-up prices since March, in anticipation of the U.S./global recoveries. The First Call FY2009/FY010 EPS estimates for UNP are $3.62 to $4.26.
Once international trade shows signs of bottoming, UNP's transported volumes will increase, but by that time UNP's shares will have been bid-up to a high P/E. Hence, the entry point is now or likely never.
Stock Analysis: Union Pacific is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 50% position in UNP now; then buy another 25% in three months, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your UNP position before October 2009. Sell/Stop Loss if you were to buy shares in this company: $27.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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