(The Associated Press circulated the following on September 17.)
NEW YORK — A Longbow Research analyst upgraded shares of Union Pacific Corp. to “Buy” from “Neutral” on Wednesday, saying a recent pullback in the stock will allow investors to take advantage of the railroad’s long-term growth prospects.
Analyst Lee Klaskow noted the stock has lost about 13 percent since hitting a year-high in late August. He suggests that the stock will grow as the company reprices legacy contracts and makes further operational improvements.
The analyst increased full-year estimates for 2008 and 2009, and suggested Union Pacific could exceed its own expectations in the third quarter when it releases earnings for the period next month.
The biggest driver of an upbeat third quarter, Klaskow said, is the falling cost of fuel. Union Pacific, like other railroads, is being helped by a nearly 40 percent drop in the price of oil since a July record. The group is also being aided by fuel surcharges, which because of their two-month lag, leave most railroads collecting more in gas fees than they are currently paying.
But Klaskow said he still remains concerned about the uncertainty in the U.S. economy, noting he believes “the risk of recession remains real.”
But the analyst said that Union Pacific’s carload mix tips toward steady freight that would keep the railroad balanced in an economic downturn.
Shares of Union Pacific fell $1 to $72.16 in morning trading amid a broader market slide in the wake of the government bailout of insurer American International Group Inc.