Union Pacific (UNP) Stock Slumps, Downgraded at Deutsche

Union Pacific (UNP) shares are slipping after the company's rating was cut to 'hold' from 'buy' at Deutsche Bank Wednesday morning.
By Annie Palmer ,

NEW YORK (TheStreet) -- Shares of Union Pacific (UNP) - Get Report  are down by 0.18% to $93.95 in pre-market trading Wednesday morning, as the company's rating was cut to "hold" from "buy" at Deutsche Bank.

The firm maintained its price target on the Omaha-based locomotive operator at $94, but lowered its rating based on valuation.

"We are waiting for rail volumes to inflect positively to drive operating leverage to grow more constructive on the group more broadly as mix and fuel headwinds are poised to weigh on near-term earnings trends," Deutsche Bank said in an analyst note.

Rail shares are unlikely to see any short-term volume growth given the dollar's strength, high inventory and heightened uncertainty in the global economy, the firm added. For now, they continue to be trading at fair value, Deutsche Bank said.

The firm said Genesee & Wyoming (GWR) is their top pick among rail stocks considering its valuation and possible mergers. 

Union Pacific is expected to post fiscal 2016 second quarter results tomorrow before opening bell. Analysts surveyed by Thomson Reuters expect Union Pacific to report $1.17 per share on earnings of $4.79 billion.

Last year, Union Pacific posted $1.38 per share on revenue of $5.43 billion for the second quarter.

Separately, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:

We rate UNION PACIFIC CORP as a Buy with a ratings score of B. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, good cash flow from operations, expanding profit margins and notable return on equity. We feel its strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.

You can view the full analysis from the report here: UNP

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