Advertisement
UK markets closed
  • NIKKEI 225

    41,275.08
    +84.40 (+0.20%)
     
  • HANG SENG

    17,727.98
    -287.96 (-1.60%)
     
  • CRUDE OIL

    80.75
    -1.16 (-1.42%)
     
  • GOLD FUTURES

    2,473.40
    +44.50 (+1.83%)
     
  • DOW

    40,954.48
    +742.76 (+1.85%)
     
  • Bitcoin GBP

    49,929.89
    +821.09 (+1.67%)
     
  • CMC Crypto 200

    1,349.31
    +8.34 (+0.62%)
     
  • NASDAQ Composite

    18,509.34
    +36.77 (+0.20%)
     
  • UK FTSE All Share

    4,482.44
    -7.75 (-0.17%)
     

Union Pacific Corporation (UNP): The Best Freight Stock To Buy Now

We recently compiled a list of the 11 Best Freight Stocks To Buy Now. In this article, we are going to take a look at where Union Pacific Corporation (NYSE:UNP) stands against the other freight stocks.

The Red Sea Crisis & Shipping Challenges

The Red Sea accounts for 30% of global container trade via the Suez Canal. According to a report by JP Morgan, the Houthi attacks have disrupted the entire supply chain, forcing companies to reroute around Southern Africa, adding 4,000 miles to every journey. Rerouting will increase transit times by almost 30% and global container shipping capacity will decline by almost 9%. The report suggests that spot rates have soared amid the crisis. Spot rates in January 2024 from China to the US West and East Coast rose by 140% to 120% compared to November 2023. Jamie Dimon's investment bank expects trade disruptions to add 0.7 percentage points to global core goods inflation, and 0.3 percentage points to overall core inflation.

On May 6, Reuters reported that Maersk, the shipping giant, predicted that the crisis would cut the industry's capacity by almost 20% between Asia and Europe in the second quarter of 2024. Large shipping companies have diverted routes around Africa, leading to a rise in freight costs and shipping time. According to the Danish shipping group, shipping costs between Asia and Europe are now 40% higher for every journey. While experts expect the crisis to slow down before the end of 2024, the uncertainty and risk attached to the future of shipping are costing major shipping companies. To counter bottleneck situations and fuel faster sailing, companies are increasing their shipping capacity. The company has so far released over 125,000 additional containers. You can also read our piece on the most advanced countries in logistics.

Technology Disrupting the Freight Industry

While the Red Sea crisis is a major headwind for the freight industry, technological advancements will be monumental for the sector's growth. Companies like GXO are using technology to disrupt the industry. You can also take a look at the richest billionaires in the logistics industry.

ADVERTISEMENT

On May 14, the company deployed robots for a global sporting goods retailer in France. The robotics solution was designed to reduce the order processing time and improve response time to seasonal volume changes. The solution is deployed across 12,000 square meters at the site. The solution includes 500 autonomous mobile robots that manage 70,000 bins on 5.5-meter tall storage racks. In 2023, the company increased its automated and tech systems by 50% and is actively working to integrate machine learning and artificial intelligence. Here are some comments from the company's Q1 2024 earnings call:

"Automation is a key tenant of our value proposition. And we’re the first mover in trialing the integration of cutting-edge automation like humanoid and AI inside the four walls of the warehouse. We’ve recently introduced some exciting innovations in AI. First, the warehouse optimization pilot we mentioned last quarter was a success driving a productivity increase of approximately 15%, and we’re rolling out the app across our sites as we speak. Second, we’ve recently piloted a proprietary workforce management tool, which we developed in-house. Our tool makes more than 15 million decisions per minute to streamline inventory replenishment and adding about 7% of capacity at no additional cost. We will be deploying this solution broadly across our operations starting this year."

Now that we have studied the freight industry, let's discuss some of the best freight stocks to buy now. You can also read our piece on the best transportation stocks to buy.

Our Methodology

To come up with the 11 best freight stocks to buy now, we went over our own rankings, similar rankings on the internet, and three transportation ETFs. We created an initial pool of 30 freight stocks and selected the top 11 with the largest number of hedge fund holders as of Q1 2024. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).

An intermodal container train winding through a rural landscape.

Union Pacific Corporation (NYSE:UNP)

Number of Hedge Fund Holders: 87 

Union Pacific Corporation (NYSE:UNP) ranks first on our list of the best freight stocks to buy now. The railroad company has operations across 23 states in the United States and ships several commodities including food, forest products, automobiles, agricultural products, coal, and chemicals.

Analysts are bullish on Union Pacific Corporation (NYSE:UNP) and hold a consensus buy opinion. Based on price targets of 30 analysts, the stock's median forecast of $270 represents an upside of over 18% from current levels, as of May 31. The stock is also popular among investors, as 87 hedge funds disclosed having stakes in the company worth $4.93 billion at the close of the first quarter. Ken Fisher's Fisher Asset Management was among the top shareholders in the company and disclosed a position worth $1.47 billion.

Union Pacific Corporation’s (NYSE:UNP) generated revenue of $6.03 billion in Q1 2024 and beat revenue estimates by $59.45 million. The company logged an EPS of $2.69 and beat estimates by $0.17. Union Pacific Corporation (NYSE:UNP) has grown its earnings by 5.74% over the past 5 years and is expected to grow them by 14.5% over the next 5 years. The company intends to improve its profitability in 2024 and enhance efficiency.

Union Pacific Corporation's (NYSE:UNP) diversified business model sets it apart. In the first quarter of 2024, the company saw a 14-17 point year-over-year improvement in intermodal, manifest, and auto SPI. Union Pacific Corporation's (NYSE:UNP) freight revenue increased by 4% relative to last year, and expenses went down by 3% year-over-year.

Overall UNP ranks 1st on our list of the best freight stocks to buy. You can visit 11 Best Freight Stocks To Buy Now to see the other freight stocks that are on hedge funds’ radar. While we acknowledge the potential of UNP as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than UNP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

 

READ NEXT: Analyst Sees a New $25 Billion "Opportunity" for NVIDIA and Jim Cramer is Recommending These 10 Stocks in June.

 

Disclosure: None. This article is originally published at Insider Monkey.