Union Pacific Corporation (UNP), for the first time in 6 years, saw volume growth in all 6 of its business segments as the economic recovery gains steam. Earnings are expected to grow by 43.8% in 2010.

Union Pacific operates a railroad in 23 Western states. It ships agricultural products, automotive, chemicals, energy, industrial products and Intermodal.

Union Pacific is also the only U.S. railroad to serve all 6 major gateways into Mexico.

Record Second Quarter

Union Pacific reports early in the earnings cycle. It is also a bellwether as to what is going on in the economy because it’s the first to see the slowdown and also the rebound.

It’s second quarter report on July 22 was very bullish about the economic recovery. Volumes rose 18% over the repressed number from the year before.

Operating revenue rose 27% to $4.2 billion from $3.3 billion in the second quarter of 2009 with Automotive revenue leading all segments with a gain of 105%. Agriculture brought up the rear with a gain of 13%.

Union Pacific surprised on the Zacks Consensus by 15.7%. Earnings were $1.40 compared to the consensus of $1.21. Union Pacific made 92 cents in the year ago period.

This continued the company’s impressive string of earnings surprises. Union Pacific has not missed on estimates in 5 years as you can see from the chart below.

Zacks Consensus Estimates Moved Higher

Union Pacific admitted that the direction of the recovery was “uncertain”. It did not provide guidance.

However, analysts have been raising estimates since the second quarter results were released.

22 out of 24 estimates for 2010 have moved higher in that time, as the 2010 Zacks Consensus has climbed by 8.3% to $5.19 from $4.79 per share.

Solid Fundamentals

Union Pacific is attractively priced, with a forward P/E of 14.4. It pays a dividend currently yielding 1.8%, which is in line with its industry.

Union Pacific is a Zacks #1 Rank (strong buy) stock.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.

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