UNP

What If You Joined Valuentum on January 1, 2013 and Followed Our Transaction Alert Emails…

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Let’s get this out of the way first: we’re not perfect. Though investors can look at our track record over a longer horizon to great satisfaction, as the Best Ideas portfolio (click here) and Dividend Growth portfolio (click here) are doing quite well for long-time members, what about new members that may have joined recently? How would they have fared by following our transaction alert emails? Would they have made money on our ideas? Before we answer these questions, let’s walk through a few ways members use our services. Many like to replicate the actively-managed portfolios that are housed in the monthly newsletters in their personal accounts in their entirety. Others like to use our transaction alert emails for incremental … Read more

Our Investment Thesis on Union Pacific Remains on Track; Pricing Growth Strong

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Must Read: Joint Outlook for the Railroad and Coal Industries Union Pacific (UNP) showed why the company is included in the Best Ideas portfolio when it reported fourth quarter results Thursday. The company’s headline was nice: “Best-Ever Quarterly Results.” That’s saying quite a bit as coal shipments continue to provide stiff headwinds across much of the industry. Norfolk Southern (NSC), for example, recently reported an 8% decline in coal volumes during its fourth quarter, its results released Wednesday. Though revenue carloads of coal declined 10% during Union Pacific’s fourth quarter, strong pricing almost completely offset the weakness in this segment. Average revenue per car across all of Union Pacific jumped 6% in the quarter, far better than inflation. We continue to … Read more

Buffett Doubles Down on USG; Teva Expected to Appoint New CEO; Crude by Rail Transportation Comes under Scrutiny

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The day after the New Year holiday was light with news, as expected, but there were three developments that we thought you should be aware of. We recently highlighted the third-quarter performance of USG (USG), the maker of wallboard under the SHEETROCK name, as it scored one of the highest ratings of a 9 on the Valuentum Buying Index in late October. Warren Buffett on Thursday announced that he has increased his stake in the firm, to 30.5% (more than double previously-reported figures). According to a recently-filed Schedule 13D/A, he now owns 43.4 million shares of the firm. USG continues to be significantly undervalued on the basis of our discounted cash-flow process, and we peg its fair value estimate north … Read more

Share Buybacks in Vogue for Portfolio Holdings

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Showcasing strong cash flow generation, portfolio holdings Union Pacific (UNP) and Phillips 66 (PSX) have issued new buyback programs recently. On November 21, Union Pacific announced a new share repurchase authorization of up to 60 million common shares by 2017. The new four year authorization allows for the repurchase of roughly 13% of current shares outstanding. On December 6, Phillips 66 approved a new $2 billion share repurchase program. Since the third quarter of 2012, Phillips 66 has authorized a total of $5 billion in share repurchases and has increased dividends from $0.20 per share to $0.39 cents per share on a quarterly basis. Though we tend to prefer immediate dividend growth instead of buyback initiatives for most dividend growth portfolio … Read more

Union Pacific Reports Best-Ever Quarterly Results; Thesis Remains Intact

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Union Pacific (UNP) reported its “best-ever quarterly results” when it posted third-quarter performance Thursday. The quarterly results, in our opinion, were truly fantastic. The company’s operating ratio came in at a record 64.8% (the firm’s best ever—1.8 points better than the year-ago period), as the railroad offset lower coal and grain volumes with strong pricing and productivity improvements. Operating revenue advanced 4% thanks mainly to core pricing gains, which translated into 10% and 13% increases in operating income and diluted earnings per share, respectively. The strength came in spite of lost revenue and increased costs from the flooding in Colorado (which hurt operating income by roughly $10 million). Year-to-date, Union Pacific has hauled in $2.25 billion in free cash flow, … Read more

Air Quality Standards Take Aim at Coal

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After competing with an abundance of lower-priced, cleaner natural gas, coal miners (KOL) may now have to deal with more demand headwinds as governments aim to reduce coal burning. The US Expectations are already for as much as 27 gigawatts’ worth of coal generation (about 8.5% of the US coal fleet) to retire by 2016. This percentage could rise to nearly 17% (one-sixth) by 2020, according to the Energy Information Administration. In addition to the expected retirements, the Environmental Protection Agency (EPA) plans to block all new coal-fired plants unless the construction of these plants coincides with expensive technology that captures greenhouse gas emissions. Image Source: Energy Information Administration Though the EPA forecasts that no traditional coal-fired power plants (1) … Read more

Headline Risk Entering the Market

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The summer months have been relatively uneventful, with the exception of concerns relating to the Federal Reserve’s coming tapering of its bond-buying program and quibbles between hedge fund giants over a company that makes protein shakes—we’re talking about Herbalife (HLF) in the latter example. Even the sequester proved to be a largely underwhelming event so far through 2013. As a result, the market has focused on fundamentals, awarding strong performance and punishing poor performance (almost irrespective of valuation parameters). However, the market remains fully valued at current levels, with the forward price-to-earnings ratio on S&P 500 companies in-line with its 10-year average at 14.1 times, and the distribution of our Valuentum Buying Index ratings tilting decidedly negative. The forward price-to-earnings … Read more

Dividend Increases for the Week Ending August 2 Included Illinois Tool Works and Union Pacific

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Below we provide a list of firms that upped their dividends for the week ending August 2. The dividend reports of covered firms on this list will be updated shortly with the new information. To access our dividend reports, please click here. Arbor Realty Trust (ABR): $0.13 per share quarterly dividend, was $0.12. B&G Foods (BGS): now $0.32 per share quarterly dividend, was $0.29. Carlisle Companies (CSL): now $0.22 per share quarterly dividend, was $0.20. CBOE Holdings (CBOE): now $0.18 per share quarterly dividend, was $0.15. Chemed Corporation (CHE): now $0.20 per share quarterly dividend, was $0.18. Comfort Systems: (FIX): now $0.055 per share quarterly dividend, was $0.05. Energizer Holdings (ENR): now $0.50 per share quarterly dividend, was $0.40. Ethan Allen Interiors … Read more

Tales from the Rails

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Since rails are heavily tied to weakening coal shipments, there was a great deal of skepticism about the industry’s strength during the back half of 2012. However, we saw evidence (AAR data) that indicated an altering freight mix (auto sales, intermodal, petroleum shipments, crushed stone, gravel and sand) could compensate for coal shipment weakness. Let’s dig into how the group is performing now that fourth-quarter results for a few of them have come in. On Thursday, Union Pacific’s (click ticker for report: ) fourth-quarter report revealed that its performance during the period was solid. Despite the weak coal shipments, revenue grew 3% year-over-year to $5.3 billion, roughly in line with consensus expectations. Earnings were better than anticipated, growing 10% year-over-year, to $2.19 a share. … Read more

No Coal? No Problem for the Rails

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In the third quarter of 2012, we highlighted weak rail traffic as being driven by weaker coal shipments, and the trend continued throughout the fourth quarter. According to the Association of American Railroads (AAR), coal shipments for the week ending on December 22 fell 11.1% year-over-year. Given the wealth of railroads that were heavily leveraged to coal, including Norfolk Southern (click ticker for report: ), CSX (click ticker for report: ), and Union Pacific (click ticker for report: ), it would be natural to assume the entire segment is ripe for decline. Yet, that doesn’t appear to be the case. The AAR also reported that total rail traffic for that same week increased 0.9% compared to the previous year and … Read more