Union Pacific Corporation (UNP) grows while increases pricing thanks to the shale drilling taking place in North America, with volume expected to grow and with the railroad returning capital to shareholders in the form of repurchases, says François Rochon, President and Portfolio Manager of Giverny Capital.
“The reason we bought Union Pacific is, and we talked about this in our annual letter, that we used to own BNSF before Berkshire Hathaway (BRK-A) purchased it. We like the fundamentals of the rail industry. This summer we went to meet the president of a big company, and he told me that he thought that BNSF and Union Pacific are almost a duopoly in the western railroad industry.”
FOR MORE INFORMATION ABOUT THIS INTERVIEW CLICK HERE.
Rochon likes the cost structure at UNP, and the says the railroad has increased pricing by about 5% per year in the last five years, a number that is especially meaningful in this low-inflation environment. The company, moreover, is conscious of its shareholders.
“They repurchased close to $6 billion of shares in the last few years. If you combine the volume increases, margins improvements and the pricing gains with returning money to shareholders, we think they can grow their earnings per share at about 12% to 15% a year going forward. The p/e ratio is about 15 times, so we think it’s reasonable,” Rochon said.
Union Pacific Corporation (NYSE:UNP) to See Improving Freight Volumes in 2017
February 14, 2017
Union Pacific Corporation (UNP) Continues Growing Earnings in the Double Digits
July 11, 2013
Union Pacific Corporation (UNP) to Face Easier Comps in Second Half
August 12, 2015
Union Pacific Corporation (UNP) Can Grow Dividend Beyond 2.85%
January 13, 2016
Chevron Corporation (CVX) Grows LNG Volumes Faster Than Major Peers
January 14, 2013
