Why Union Pacific Stock Lagged the Market Today

The stock market ended Wednesday well higher, but some benefited from the rally more than others.

One that lagged a bit behind peers was railroad company Union Pacific (NYSE: UNP); the market was guarded about the stock after it was flagged for a pair of analyst price target cuts. Its 7%-plus rise on the day would be impressive for a typical trading session, but Wednesday's saw the S&P 500 index blast 9.5% higher.

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Back-to-back analyst cuts

Neither of the cuts was overly dramatic, but together they dampened sentiment on Union Pacific's future. The first came from Jefferies' Stephanie Moore, who set a new price target of $230 per share; previously she had considered it worth $255.

The second was made by TD Cowen's Jason Seidl. He now believes Union Pacific's fair value is $252 per share, down slightly from his preceding $258.

Crucially, neither analyst changed their recommendation on the stock -- hold in Moore's case, and buy for Seidl.

Despite the cuts, there was reason to be optimistic about Union Pacific's immediate future. In previous trading sessions, investors had sold out of the stock, with many feeling (correctly) that the company is vulnerable to the initially high tariffs announced by the Trump administration.

Of tariffs and trains

Prohibitive tariffs, especially if imposed on our major Asian trading partners, could badly affect the volume of cargo Union Pacific ferries -- after all, it's a major operator to and from west coast ports.

While the tariff story continues to play out and develop in unexpected directions, this stock could see more volatility. These days it seems like a play only for investors willing to stomach roller-coaster rides.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Jefferies Financial Group and Union Pacific. The Motley Fool has a disclosure policy.