5 Reasons There Is Only One Choice In This Industry: Union Pacific Corporation (UNP), CSX Corporation (CSX)

Page 1 of 2

In some industries, there isn’t one clear leader. For example, in the retail space you could argue that while Amazon.com, Inc. (NASDAQ:AMZN)appears the clear online leader, Wal-Mart Stores, Inc.(NYSE:WMT) is still the king when it comes to overall sales. However, if investors are looking for the best stock in the railroad industry, there is one leader and then everyone else. I’ve identified at least five different reasons that Union Pacific Corporation (NYSE:UNP) should be an investors first choice in this industry.

Union Pacific (UNP)They Make More Money:
There are three key numbers I look at whenever I pull apart an earnings report. I look for good revenue growth, good EPS growth, and good operating cash flow growth. Most of the time I have to be pleased if a company can increase two of the three categories, but Union Pacific scores a perfect three for three. The company’s major competition comes from CSX Corporation (NYSE:CSX) and Norfolk Southern Corp. (NYSE:NSC) and to be blunt, they just can’t keep up.

When it comes to revenue growth, Union Pacific increased this measure by 3% in the last quarter. This might not seem too impressive, until you consider that CSX saw revenue decrease 2%, and Norfolk Southern saw a decline of 4%. This top line growth also lead to better EPS performance, with Union Pacific showing a 10% increase. Their competition saw EPS come in flat at CSX, and down 8.45% at Norfolk Southern.

Since EPS can be manipulated, I always check operating cash flow growth. As you might have guessed, Union Pacific outperformed its rivals again. The company was actually the only one of the three to show operating cash flow increase. Union Pacific saw an increase of 4.9% versus declines of 15.61% at CSX, and 5.02% at Norfolk Southern.

Better Performance = Better Dividend Coverage And A Better Balance Sheet
It would be one thing if Union Pacific were generating better earnings and EPS growth by making short-term bets that harmed their balance sheet, or put their cash flow at risk. However, the company is doing the exact opposite. Union Pacific actually shows the best dividend coverage of the three and has the strongest relative balance sheet.

For long-term investors, a reasonable free cash flow payout ratio is essential. The bottom line is, a dividend is really only as attractive as the cash flow that covers the payout. On this score, Union Pacific’s recent payout ratio should make investors very happy. In the last quarter, the company’s free cash flow payout ratio was just 44%. Compared to the over 90% payout ratio at CSX, and the over 75% payout ratio at Norfolk Southern, you can see that Union Pacific shareholders have little to worry about.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!