In addition to manufacturers and sellers of things now eschewed by recession-damaged consumers, companies that transport those goods wouldn't be expected to be doing all that well.

But Union Pacific (UNP) - Get Union Pacific Corporation Report (Stock Quote: UNP) may be back on track as an investment, helped by a price-to-earnings ratio that will likely grab the attention of value investors and the price of fuel at less than half its record high. And legendary value maven Warren Buffett has taken a liking to the railroad industry -- to the tune of $4.7 billion.

Even though UNP's freight volume slumped 12% during the dismal fourth quarter, lower fuel costs along with productivity enhancements and more favorable pricing helped the carrier raise its net income by 35% to $661 million, or $1.31 per share, from $491 million a year earlier, or 93 cents.

UNP's stock price crumbled from the mid-$80s in late August to the high $30s earlier this month before a modest rebound to the low- to mid-$40s. Goldman Sachs raised its rating to "buy" from "hold" last month. Ratings' quantitative evaluation model assigns UNP an overall grade of B-minus, which equates with a cautions "buy" recommendation.

As can be seen in the accompanying table, the company's precipitous price decline contributed to a "risk grade" of D-plus while its attractive p/e ratio helped it achieve a "reward grade" of A-minus.

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Union Pacific, the nation's largest rail carrier, operates more than 32,000 miles of track across 23 western and Gulf Coast states. While its shipments of automobiles sank 17% in the fourth quarter, energy shipping climbed 20%, while the agricultural business advanced 10%.

For fiscal 2008, which ended Dec. 31, UNP's earnings per share climbed 32% to $4.54 on a 4.5% advance in revenue to $16.3 billion.

The consensus of analysts is that per-share net will ease to $4.39 this year but rebound 16% to $5.09 next year, as the economy begins to recover.

Union Pacific has recently been priced at 9.7 times this year's estimated earnings and 8.4 times next year's. Assuming analysts are correct in their estimates of a resumption to earnings growth as the economy gathers steam, it wouldn't seem unreasonable to expect the rail carrier's p/e multiple to expand in tandem with earnings growth.

Investors might take heart from a Jan. 20 investment of $271.2 million by Buffett's Berkshire Hathaway (BRKA) (BRKB) (Stock Quote: BRK.A) in the railroad industry. Buffett acquired 4.4 million additional shares in UNP's major competitor, Burlington Northern Santa Fe (BNI) (Stock Quote: BNI), bringing Berkshire Hathaway's stake to 74.5 million shares worth $4.7 billion. The investment icon has hinted that he is likely to buy more of the railroad's shares.

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