Union Pacific Corporation (NYSE: UNP) and Canadian National Railway (NYSE:CNI) are both large-cap transportation companies, but which is the superior investment? We will compare the two businesses based on the strength of their dividends, risk, analyst recommendations, earnings, valuation, profitability and institutional ownership.

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for Union Pacific Corporation and Canadian National Railway, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Union Pacific Corporation 1 13 4 0 2.17
Canadian National Railway 1 8 4 0 2.23

Union Pacific Corporation currently has a consensus target price of $117.75, suggesting a potential upside of 1.69%. Canadian National Railway has a consensus target price of $81.80, suggesting a potential upside of 1.63%. Given Union Pacific Corporation’s higher possible upside, equities research analysts clearly believe Union Pacific Corporation is more favorable than Canadian National Railway.

Insider and Institutional Ownership

78.5% of Union Pacific Corporation shares are held by institutional investors. Comparatively, 54.3% of Canadian National Railway shares are held by institutional investors. 0.2% of Union Pacific Corporation shares are held by company insiders. Comparatively, 2.4% of Canadian National Railway shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Earnings and Valuation

This table compares Union Pacific Corporation and Canadian National Railway’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Union Pacific Corporation $20.72 billion 4.47 $9.80 billion $5.66 20.46
Canadian National Railway $9.92 billion 6.09 $5.34 billion $3.90 20.64

Union Pacific Corporation has higher revenue and earnings than Canadian National Railway. Union Pacific Corporation is trading at a lower price-to-earnings ratio than Canadian National Railway, indicating that it is currently the more affordable of the two stocks.

Risk & Volatility

Union Pacific Corporation has a beta of 0.84, suggesting that its stock price is 16% less volatile than the S&P 500. Comparatively, Canadian National Railway has a beta of 1.13, suggesting that its stock price is 13% more volatile than the S&P 500.

Dividends

Union Pacific Corporation pays an annual dividend of $2.42 per share and has a dividend yield of 2.1%. Canadian National Railway pays an annual dividend of $1.32 per share and has a dividend yield of 1.6%. Union Pacific Corporation pays out 42.8% of its earnings in the form of a dividend. Canadian National Railway pays out 33.8% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Union Pacific Corporation has increased its dividend for 5 consecutive years and Canadian National Railway has increased its dividend for 7 consecutive years.

Profitability

This table compares Union Pacific Corporation and Canadian National Railway’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Union Pacific Corporation 21.84% 23.35% 8.12%
Canadian National Railway 29.98% 25.57% 10.29%

Summary

Canadian National Railway beats Union Pacific Corporation on 10 of the 16 factors compared between the two stocks.

About Union Pacific Corporation

Union Pacific Corporation is a railroad operating company in the United States. The Company operates through its principal operating company, Union Pacific Railroad Company (UPRR). Its business mix includes Agricultural Products, Automotive, Chemicals, Coal, Industrial Products and Intermodal. Its freight traffic consists of bulk, manifest, and premium business. Bulk traffic primarily consists of coal, grain, soda ash, ethanol, rock and crude oil shipped in unit trains-trains transporting a single commodity from one origin to one destination. Manifest traffic includes individual carload or less than train-load business involving commodities, such as lumber, paper, food and chemicals. The transportation of finished vehicles, auto parts, intermodal containers and truck trailers are included as part of its premium business. As of December 31, 2016, its network included 32,070 route miles, linking Pacific Coast and Gulf Coast ports with the Midwest and Eastern United States gateways.

About Canadian National Railway

Canadian National Railway Company is engaged in the rail and related transportation business. The Company’s network of approximately 20,000 route miles of track spans Canada and mid-America, connecting approximately three coasts, including the Atlantic, the Pacific and the Gulf of Mexico and serving the cities and ports of Vancouver, Prince Rupert (British Columbia), Montreal, Halifax, New Orleans, and Mobile (Alabama), and the metropolitan areas of Toronto, Edmonton, Winnipeg, Calgary, Chicago, Memphis, Detroit, Duluth (Minnesota)/Superior (Wisconsin), and Jackson (Mississippi), with connections to all points in North America. Its network and connections to all Class I railroads provide its customers access to the three North American Free Trade Agreement nations. It carries over 300 million tons of cargo, serving exporters, importers, retailers, farmers and manufacturers. Its freight includes seven commodity representing a portfolio of goods.

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