As expected, Union Pacific (NYSE: UNP) is rolling along, which is why I'm Reiterating my Buy rating for the company, first recommended on March 27, 2009 at a price of $43.00. If you bought UNP in March, you're up 37%.UNP posted Q3 EPS of $1.02, above Wall Street's 98 cents-$1.01 consensus estimate. Stronger pricing power played a role, and that bodes well for the quarters ahead.
To be sure, with a P/E of 14, UNP, the leading rail freight carrier in the United States, is not as cheap as it was in March, but the calculation here remains that the railroad rebound has only just begun, due to U.S./global economic recoveries. The First Call FY2009/FY2010 EPS estimates for UNP are $3.54 to $4.23.
Technically, Union Pacific's stock chart is strong, with the stock having cleared $60 resistance in late summer. A recent pull-back below $60 represents a Buy opportunity.
Still, assuming a $90-95 top during the current economic expansion, the $60 rangeprobably represents the last chance to buy UNP and earn an outsized gain in this cycle.
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 25% position in UNP now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your UNP position before December 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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