Is Union Pacific a Good Investment?

PHOTO CREDIT: Union Pacific

OVERVIEW

Union Pacific Corporation is a company based in the United States. The company operates rail services for cargo in the United States. The company operates over 32,000 miles of rail networks from the Pacific Ocean up to the Mississippi River. The company also operates over 8300 locomotives and thousands of rail cars on these tracks. The company was founded in 1862.

Why You Should?

  1. Union Pacific is a great reopening play in an investor’s portfolio. The company saw a drop in demand during the pandemic as the industrial and commercial economies shut down around the world. However, once these parks of the economy start to reopen, the company will see a rise in cargo volumes and demand.
  2. The Biden administration will benefit the company and its investors. Biden will look to sign massive trade deals with countries in Asia (like China, Japan, South Korea, etc.). This will cause a rise in demand for the company’s products and services as there will be higher cargo volumes that will be shipped between Asia and the United States.
  3. Pacific trade routes will continue to see strong growth as people in the United States want more products that are made in Asia (and vice versa). This will benefit Union Pacific as they operate rail lines to most major Pacific ports and will see higher cargo volumes on their trains. This will also benefit an investor’s as the stock price will rise along with the company’s performance.
  4. Union Pacific is a safe investment option in an investor’s portfolio. Though the company will suffer due to low volumes during recessions, the industrial economies of the United States and Asia are extremely resilient and will return with strength. The recession caused by the pandemic is a great example of this. As industrial economies grow, the company’s stock price will rise.

Why You Should Not?

  1. The company faces tough competition in the rail industry. Some of these competitors include BSNF, Kansas City Southern, CSX, J.B. Hunt, and many others. This competition might hurt the company and its investors in the future.
  2. The COVID-19 pandemic reduced the volumes of cargo that the company saw from countries in Asia to the United States as the industrial and commercial economy shut down. This caused the company to retire some of its locomotives and also caused the company’s stock price and operating results to drop. This has hurt investors in the company as well.

MY OPINION

I think that Union Pacific is a great long-term investment due to its position as a good reopening play, a safe investment option, the growth in the Pacific markets, as well as positive impacts from a Biden administration. However, tough competition and negative impacts from the pandemic might hurt the company and its investors.

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Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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Aaditya Patel

Aaditya Patel

Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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