Will Buffett’s Latest Move Test the Opposition?

Most companies would dream of having a one year stock chart similar to Union Pacific. They have steadily risen in value, but the stock has seen very little volatility. Apparently, it is a great business to move things around the country. It’s also the kind of business that looks to produce returns steadily, which is something everybody would want in their portfolio. If you are a shareholder of Union Pacific, beware as Warren Buffett is trying to spoil the fun.

Berkshire Hathaway announced a couple of weeks ago that Burlington Northern Santa Fe Railroad is looking to launch a program that will ultimately test the viability of running locomotives on natural gas, or LNG. Even though it will be very expensive for Burlington Northern Santa Fe to retrofit their 6900 engines to accept this new fuel source, it will be dramatically less expensive for them to operate their locomotives using natural gas. This will change the entire railroad industry and force the Union Pacific shareholders to truly evaluate the tremendous impact that this move is going to have upon the company.

In the week to come, Union Pacific is going to release their quarterly earnings report. The street is expecting a 9 ½% raise in the first-quarter EPS. They expect it to jump to $1.96 per share. They also expect a 2% uptick in revenues. That will bring them to $5.22 billion. Both of these statistics should have the Union Pacific stock moving up higher and right on track. It is unlikely that an industry shakeup is going to occur anytime in the near future.

Since Warren Buffett is behind the major push to change railroads from operating on diesel fuel to natural gas, it is very significant. He has a dramatic effect on anything that he touches. Plus, Burlington Northern Santa Fe is actually the second-largest consumer of diesel fuel. They are second only to the United States Navy. If they switch over to natural gas, this will be a significant shift and have a major impact on the industry.

Plus, we all know that Warren Buffett has a tremendous amount of political influence, so it wouldn’t be surprising to see Buffett push for this, and Berkshire Hathaway will certainly support LNG powered rails if it is a transitional success. Even if there is not any regulatory pressure, the savings in cost has a tremendous potential, so Union Pacific stock owners need to be advised that they should follow these developments very closely. They will have a tremendous effect on the marketplace and the price of your shares.

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