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Union Pacific a Strong Energy Sector Signal?

Thursday, 19 Jan 2012 | 1:23 PM ET

Transports advanced Thursday along with Union Pacific’s strong earnings report, and the “Fast Money” pro staked their positions.

Trader Stephen Weiss wasn’t an owner of Union Pacific but would consider buying the railroad operator.

“What stood out to me was their pricing power. They’ve been talking about it all along. They continue to pick up share from trucks,” he said. “The pricing power was extraordinary, and there’s no reason for it not to continue.”

Trading Financials, Rails & IBM
The Fast Money traders discuss the financials rally in 2012; Anthony Gallo, Wells Fargo, breaks down Union Pacific's Q4 earnings, which came in better than expected; David Grossman, Stifel Nicolaus, shares his position on IBM, saying the near term troubles are an opportunity to buy.

Weiss noted positives such as improving operating ratios, as well as potential headwinds that included a decrease in coal traffic and natural gas in light of warmer weather throughout the northern United States.

“We’ll get through that, I believe, and that’s not an unknown,” Weiss said.

Union Pacific shares hit an all-time high of $114.82 after reporting fourth-quarter profit of $964 million, up 24 percent.

Pete Najarian of OptionMonster.com said the story was much bigger than just coal.

“This is about the entire energy complex, and they seem to be profiting no matter what,” he said. “That’s where they’re seeing a lot of this growth.”

Before the earnings call, Wells Fargo analyst Anthony Gallo said had expected the stock price to hit $127 to $136 in the next six to 12 months.

“Just to put these earnings in perspective, Q4 2011 EBIDTA is literally two times what it was versus pre-recession-level Q4 ’06 even though carloads are still 6 percent below those prior peaks,” he said. “So pricing and productivity continue to be a very important part of the railroad earnings story.”


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Trader disclosure: On Jan. 19, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders: P. Najarian is long AAPL calls; P. Najarian is long BAC calls; P. Najarian is long C; P. Najarian is long MS calls; P. Najarian is long MSFT; P. Najarian is long INTC; J. Najarian owns AAPL; J. Najarian owns AKS; J. Najarian owns GS; J. Najarian owns NFLX; J. Najarian owns CDR; J. Najarian owns JNPR; J. Najarian owns EBAY; J. Najarian owns MSFT; J. Najarian owns KBH; J. Najarian owns XHB; Weiss is long BRCM; Weiss is long SNDK;

Weiss is long ETP; Weiss is long EUO; Weiss is long QCOM; Weiss is long F; Weiss is long GM; Weiss is long CSC; Weiss is long DVN; Weiss is long WLT; Weiss is long CAF; Weiss is long MOS; Weiss is long NS; Weiss is long HPQ; Weiss is long RIMM; Weiss is long WLP; Weiss is long SVU; Weiss is long MDRX; Weiss is short FXA; Kelly is long XHB; Kelly is long USG; Kelly is long MHK;

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GOOG - Investment banking (next 3 months): BGC Financial LP and/or its affiliates, expect to receive, or intend to seek, compensation for investment banking services within the next three months from all of the companies referenced within this report.

Lead or Co-manager: BGC Financial LP and/or its affiliates, has not acted as lead or co-manager in a public offering of equity and/or debt securities for Google within the last 12 months. BGC Financial LP and/or its affiliates has not received compensation for investment banking services in the last 12 months from Google.

(AAPL) Investment banking (next 3 months): BGC Financial LP and/or its affiliates, expect to receive, or intend to seek, compensation for investment banking services within the next three months from all of the companies referenced within this report.

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Stifel, Nicolaus & Company, Inc. makes a market in the securities of International Business Machines Corp.

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For David Goldberg
(DHI) This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and non-investment banking securities-related services are being, or have been, provided. . Within the past 12 months, UBS Securities LLC has received compensation for products and services other than investment banking services from this company/entity.

(KBH) UBS AG, its affiliates or subsidiaries beneficially owned 1% or more of a class of this company`s common equity securities as of last month`s end (or the prior month`s end if this report is dated less than 10 days after the most recent month`s end).

UBS Securities LLC makes a market in the securities and/or ADRs of this company.

(LEN) UBS AG, its affiliates or subsidiaries has acted as manager/co-manager in the underwriting or placement of securities of this company/entity or one of its affiliates within the past 12 months. 4. Within the past 12 months, UBS AG, its affiliates or subsidiaries has received compensation for investment banking services from this company/entity. UBS AG, its affiliates or subsidiaries expect to receive or intend to seek compensation for investment banking services from this company/entity within the next three months.

(MTH) Within the past 12 months, UBS AG, its affiliates or subsidiaries has received compensation for investment banking services from this company/entity. UBS Securities LLC makes a market in the securities and/or ADRs of this company.

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