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Top Research Reports for Union Pacific, Freeport-McMoRan & Block

Tuesday, May 14, 2024

The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features new research reports on 16 major stocks, including Union Pacific Corporation (UNP), Freeport-McMoRan Inc. (FCX) and Block, Inc. (SQ). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.

You can see all of today’s research reports here >>>

Union Pacific shares have outperformed the Zacks Transportation - Rail industry over the past year (+25.9% vs. +13.0%), reflecting a reputation for operating excellence and a track record of returning excess to shareholders through buybacks and an attractive dividend. The company bought back $0.7 billion worth of its won shares and paid dividends worth $3.2 billion in 2023.

Union Pacific's strong free cash flow generating ability supports its shareholder-friendly activities. On the flip side, a decline in volumes due to soft consumer markets and reduced fuel surcharge revenues is a concern. Volumes declined 1% year over year in 2023.

Given the soft freight market scenario, the revenue weakness is likely to persist going forward as well. This will hurt overall volumes. Operating ratio (operating expenses as a percentage of revenues) deteriorated 220 basis points in 2023 from the 2022 reading, mainly due to revenue weakness. Capital expenditures are expected to be $3.4 billion in 2024.

(You can read the full research report on Union Pacific here >>>)

Shares of Freeport-McMoRan have gained +46.1% over the past year against the Zacks Mining - Non Ferrous industry’s gain of +54.7%. The company is conducting exploration activities near existing mines to expand reserves. It is expected to gain from progress in exploration activities that will boost production capacity.

Freeport-McMoRan is executing a number of smelter projects in Indonesia. Freeport’s Lone Star project also provides additional upside. It is well-positioned to benefit from automotive electrification, which is a positive for copper as electric vehicles are copper-intensive. The company's efforts to reduce debt is also encouraging.

However, it faces headwinds from higher labor, energy and services costs. Weak copper volumes may also hurt performance in 2024. Sizable capital spending is likely to impact free cash flow generation.

(You can read the full research report on Freeport-McMoRan here >>>)

Block shares have underperformed the Zacks Technology Services industry over the year-to-date period (-9.8% vs. +13.0%). The company’s strength across Square and Cash App ecosystem contributed well. Strong growth in transaction and subscription revenues drove the results further. Robust performance of the company’s ‘buy now, pay later’ (BNPL) platform remained positive.

Also, growing GPV owing to Square ecosystem momentum was another positive. Improvement in the card-present volumes remained a tailwind. Also, rising card-not-present GPV owing to robust online channels contributed well. Growing momentum in bitcoin space remained another positive.

However, increasing competitive pressure from PayPal and Shopify. Softness in consumer spending trends in food and drink and retail discretionary verticals, are headwinds.

(You can read the full research report on Block here >>>)

Other noteworthy reports we are featuring today include Xcel Energy Inc. (XEL), Illumina, Inc. (ILMN) and Marathon Oil Corporation (MRO).

Director of Research

Sheraz Mian

Note: Sheraz Mian heads the Zacks Equity Research department and is a well-regarded expert of aggregate earnings. He is frequently quoted in the print and electronic media and publishes the weekly Earnings Trends and Earnings Preview reports. If you want an email notification each time Sheraz publishes a new article, please click here>>>

Today's Must Read

Union Pacific (UNP) Strong on Dividends Amid Revenue Woes

Exploration Progress, Debt Reduction to Aid Freeport (FCX)

ADVERTISEMENT

Momentum in Cash App & Square Ecosystems Benefits Block (SQ)

Featured Reports

Investments & Expanding Customer Base Aid Xcel Energy (XEL)
Per the Zacks analyst, Xcel Energy's investment of $39 billion through 2028 is likely to strengthen operations. The rising electric and natural gas customer base will boost demand and profitability.

Illumina (ILMN) Banks on NovaSeq Prospect Amid Macro Woes
The Zacks Analyst is impressed with Illumina's strong high throughput consumables growth, notably in NovaSeq X following the successful launch of the 25B flow cell. Yet, macro issues raise concerns.

Low Breakeven Costs to Aid Marathon Oil's (MRO) Cash Flows
The Zacks analyst believes that Marathon's extremely low oil price breakeven costs of just $35 a barrel should generate meaningful free cash flows and improve future profitability.

Globe Life (GL) Gains on Solid American Income Amid High Costs
Per the Zacks analyst, Globe Life is set to grow on solid American Income distribution channel, the largest contributor of premium and underwriting margin. However, high costs remain a concern.

Strategic Plans Aid Planet Fitness (PLNT), High Costs Hurt
Per the Zacks analyst, Planet Fitness is aiding from improved pricing strategies, new store expansion initiatives and digital enhancements. Yet, high costs and expenses are hurting prospects.

Strong Auto Parts Demand to Aid Asbury (ABG), High Capex Ails
Per the Zacks analyst, Asbury's Parts and Service business is likely to benefit from higher demand for auto parts. However, high capex remains a concern.

Alkermes' (ALKS) Proprietary Drugs Aid Growth, High Reliance a Woe
Per the Zacks analyst, strong sales of Alkermes' proprietary drugs are driving growth. The restructuring initiatives are also a positive. Heavy dependence on partners for revenues remains a concern.

New Upgrades

Abercrombie (ANF) Gains From Brand Strength & Other Efforts
Per Zacks analyst, Abercrombie is seeing strong sales for each of its brands. Also, the company has been witnessing favorable margin trends on reduced freight costs and improved average unit retail.

Itron (ITRI) Gains Momentum From Strong Product Portfolio
Per the Zacks analyst, Itron's performance is benefiting from robust demand trends across all business segments. Also rising sales of water meter, and communication module are tailwinds.

Groupon's (GRPN) Local and Travel Categories Drive Growth
Per the Zacks analyst, Groupon is benefitting from strong momentum across its local and travel categories, particularly in the North American region.

New Downgrades

Southwest Airlines (LUV) Weighed Down by Higher Expenses
The Zacks analyst is worried about the fact that increased labor and airport costs as well as rising fuel prices does not bode well for Southwest Airlines' bottom line.

Weakness in Business & Mass Markets Segments Ail Lumen (LUMN)
Per the Zacks analyst, Lumen's performance is affected due to weakness in Business and Mass markets segments. Also, stiff competition is a headwind.

Iron Mountain (IRM) Gains From Data Center & Storage Demand
Per the Zacks analyst, strong cash flows from the storage and records management businesses and data-center business expansion are likely to aid Iron Mountain despite high interest rate environment.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Xcel Energy Inc. (XEL) : Free Stock Analysis Report

Marathon Oil Corporation (MRO) : Free Stock Analysis Report

Freeport-McMoRan Inc. (FCX) : Free Stock Analysis Report

Union Pacific Corporation (UNP) : Free Stock Analysis Report

Illumina, Inc. (ILMN) : Free Stock Analysis Report

Block, Inc. (SQ) : Free Stock Analysis Report

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Zacks Investment Research