Optional product analytics
With your permission, we use privacy-limited analytics to understand which research journeys work. We do not run advertising trackers or session replay. You can change this choice in Preferences. Read the Privacy Policy.
The greatest commercial opportunity lies in accelerating cross-border freight traffic through enhanced trackage partnerships with Canadian National into Mexico.
Operating margin dropping below 37.0% alongside employee compensation cost inflation exceeding 8.0% YoY.
We assign a Sell rating to Union Pacific Corporation. While the company operates a premier Class I rail franchise with wide-moat pricing power, the market price significantly overstates sustainable earnings growth and capital return potential.47
Our house rating is Sell. For an ordinary investor, this recommendation indicates that capital should be reallocated away from the stock into more attractively priced industrial alternatives, as the current valuation offers unfavorable risk-adjusted return prospects over a 12 to 24 month horizon.
This report was prepared at a share price of $274.07 as of September 24, 2026. The house conclusion establishes a Fair value of $184.01 and a Potential value of $226.07. The report-date price trades at an extensive 48.9% premium above Fair value, representing an expected downside of 32.9% to our central valuation, and remains substantially above our high-end Potential value.
The primary risk to our negative thesis is an accelerated industrial demand cycle that expands volumes faster than projected. If manufacturing nearshoring along the Mexican border expands freight traffic, Union Pacific could absorb higher carloads across its latent train capacity without proportionate cost increases. A reader would see this unfolding through sustained carload volume growth exceeding 4% year-over-year, operating margins widening beyond 41.5%, and annual free cash flow surging toward $6.5B as capital expenditures normalize ahead of schedule.156
The business continues to execute strong commercial operations, generating $23.22B in freight revenue in FY2025 across non-replicable western routes and sustaining a 40.17% operating margin via Precision Scheduled Railroading. Management has achieved eight consecutive quarters of record workforce productivity while advancing key bottleneck expansions in Houston and the Pacific Northwest. Once these projects conclude, lower reinvestment requirements can release over $1.3B in incremental cash for share buybacks, supporting earnings per share growth toward our Potential value of $226.07. However, this upside remains secondary to the substantial valuation gap against our central Fair value of $184.01.567
The company operates a contiguous 32,000-mile network across 23 western states that cannot be duplicated. This right-of-way scale protects 100% car order fulfillment across core industrial lines and supports firm freight pricing without aggressive discounting.57
Current elevated capital spending of $3.79B (15.5% of revenue) funds high-return double-tracking and siding extensions in Houston and the Sunset corridor. Once complete, capex normalizing toward maintenance levels of ~$2.46B can unlock over $1.3B in annual free cash flow for buybacks.56
Strategic commercial agreements with Canadian National enhance competitive access to Mexican gateways against CPKC. Supported by an active pipeline of approximately 200 industrial development project requests, new facility connections including Hyundai Steel and AGP grain reinforce volume growth.5
Sell: Union Pacific operates an exceptional rail duopoly with structural 40% operating margins, but the share price of $274.07 trades at an unjustified 48.9% premium above our Fair value of $184.01.46
Union Pacific Railroad Company is the principal operating company of Union Pacific Corporation. One of America's most recognized companies, Union Pacific Railroad Company connects 23 states in the western two-thirds of the country by rail, providing a critical link in the global supply chain. The Railroad’s diversified business mix includes Bulk, Industrial, and Premium.
UNION PACIFIC CORP operates an emergency response management center 24 hours a day. The center receives reports of emergencies, dangerous or potentially dangerous conditions, and other safety and security issues from its employees, the public, law enforcement, and other government officials.
In a severe stagflationary freight recession, carload volumes contract by 5% as manufacturing and automotive production weaken, while employee compensation escalates at 7% annually and fuel costs surge, imposing an operating ratio drag exceeding 120 bps. Concurrently, annual capital expenditures remain locked above $3.79B due to contractual siding commitments in Houston and Sunset corridors, preventing capex from falling to maintenance levels (~65% of capex / $2.46B). With total debt of $31,168,999,424 facing refinancing at pre-tax debt costs of 5.76%, annual interest expense rises by $40M-$60M, compressing net margins below 25% and reducing free cash flow conversion. Under these combined shocks, equity value approaches the downside valuation boundary of $153.08.
The Bear scenario models an industrial freight downturn where carload volumes contract across major manufacturing, construction, and automotive sectors. Overcapacity in highway trucking creates aggressive price competition for domestic intermodal loads, while union wage inflation and elevated fuel volatility compress the operating ratio. Network bottleneck projects encounter construction delays and cost overruns, preventing capital expenditures from normalizing to maintenance levels. Under these stagflationary pressures, cash earnings power degrades and valuation multiples de-rate, leading to significant downside from $274.07 toward $184.01.
Reported operating margins fell to 37.65% in FY2023, while 2026Q2 experienced 7% employee cost inflation and 120 bps fuel headwinds. An operating margin print below 37.0% shatters the 40.2% PSR margin thesis floor, reducing fair value by 18.5%.56
The five developments that would weaken our investment case.
Operating margin dropping below 37.0% indicates that union labor inflation (+7% per employee) and fuel volatility are overwhelming Precision Scheduled Railroading efficiencies and pricing power.
Current:40.17% (FY2025) / 40.25% (2026Q2)
Alert if< 37.0%
Union Pacific possesses a Wide economic moat derived from its irreplaceable 32,000-route-mile rail network across 23 western states, connecting Pacific Coast and Gulf ports with Midwestern rail hubs and six Mexican cross-border gateways. This contiguous infrastructure asset cannot be duplicated under any plausible commercial scenario due to insurmountable right-of-way acquisition costs, stringent environmental permitting, and capital expenditure barriers. The company generates strong returns on invested capital of 15.59%, substantially higher than its computed WACC of 8.35% and moderate cost of equity of 9.09%.
Franchise scale and regional duopoly dynamics underpin durable pricing power and operating leverage. Core product cargo and freight revenue reached $23,220M in FY2025, representing 94.74% of consolidated revenue of $24,510M. Operating margins of 40.17% in FY2025 and 40.25% in 2026Q2 demonstrate structural profitability advantages over highway motor carriers and eastern rail peers such as CSX (38.42% operating margin) and Norfolk Southern (35.30%). Strict adherence to Precision Scheduled Railroading disciplines and double-digit fuel efficiency differentials protect operating profit across business cycles.
High customer integration further solidifies the moat through switching costs. Industrial shippers, chemical refineries, and grain elevators invest tens of millions of dollars in private sidings and dedicated loading infrastructure directly connected to Union Pacific lines. Once integrated, transitioning freight to alternative rail carriers is structurally impossible without dual trackage access, while highway trucking lacks the ton-mile economics to move bulk freight over long haul routes, leaving customer retention exceptionally high.
Union Pacific consistently generates substantial economic profit, with ROIC of 15.59% maintaining a healthy spread of 724 basis points over its computed WACC of 8.35% and 650 basis points over its cost of equity of 9.09%. This economic profit is underpinned by structural 40.17% operating margins and $7,138M in net income.26
Each lens answers a different valuation question. Only included lenses set Fair value; floors and diagnostics provide context.
The highlighted cell is Fair value when every assumption sits at its base level ($184.01). Each row and column shows what Fair value becomes when one assumption moves.
A free-cash-flow drop test is not available in this run; use the discount-rate and terminal-growth grid as the primary valuation pressure test.
The Base case represents the modal operating path where Union Pacific sustains steady revenue expansion underpinned by essential agricultural, chemical, and intermodal freight corridors. Pricing power across the western duopoly keeps operating margins stable through Precision Scheduled Railroading discipline and workforce productivity. Siding extensions and terminal projects gradually eliminate network bottlenecks, allowing capital spending to normalize toward maintenance levels and releasing discretionary free cash flow for systematic share repurchases and regular dividend increases. Under this path, the projected valuation outcome is $184.01, reflecting a probability weighting of 60.0% and an expected return of -32.9% relative to $274.07 (as of 2026-09-24).
A quarterly earnings beat driven by volume growth and surcharge capture would confirm operational execution, prompting an upgrade to Reduce, though the share price at $274.07 remains at an extensive premium to $184.01.
Meeting quarterly consensus confirms steady operations under Precision Scheduled Railroading, yet leaves the wide valuation gap unresolved as the market continues to price in growth above sustainable freight rail baselines.
An earnings miss caused by margin deterioration or industrial freight volume weakness would validate the core downside thesis, accelerating valuation multiple convergence toward $184.01.
Earnings quality is robust, characterized by high cash flow conversion and conservative accounting practices across Class I rail operations. Operating cash flow reliably backs net income, with negligible dependence on non-cash accruals or aggressive working capital adjustments. Depreciation schedules match the long operating life of track infrastructure, rolling stock, and locomotives, while stock-based compensation remains a modest fraction of consolidated revenue. Working capital requirements are minimal given immediate freight settlement terms, and revenue recognition aligns strictly with completed freight transportation milestones.
Measures core operating efficiency under Precision Scheduled Railroading; an increase in the operating ratio reveals wage inflation or fuel headwinds outpacing pricing power, eroding operating profit and cash generation.
Union Pacific demonstrates robust cash generation from operations, delivering operating cash flow of $9,290M in FY2025 compared to $7,525M in FY2016. Capital expenditure totaled $3,791M in FY2025, representing 15.47% of revenue, well above historical free cash flow baselines such as the $4,020M generated in FY2016. However, analyzing capex composition reveals that approximately $2,464M (65%) is recurring network maintenance (~1.0x depreciation of $2,465M), while $1,327M represents discretionary capacity expansion in siding extensions, double-tracking, and terminal yards. This yields normalized Owner Earnings of $7,138.85M ($12.02 per share) on GAAP net income of $7,138M. As current debottlenecking programs conclude over the next 2-3 years, capital spending will gravitate toward maintenance levels, releasing substantial free cash flow.
Return on invested capital sits at 15.59%, reflecting high capital productivity under Precision Scheduled Railroading. Operating margin has stabilized at 40.17% in FY2025 and 40.25% in 2026Q2, recovering from the 37.65% cyclical low in FY2023. Although current elevated capex ($3,791M in FY2025) expands the invested capital base, incremental returns from double-tracking and siding extensions support steady ROIC.
ROIC of 15.59% generates a strong 724 basis point economic spread above the computed WACC of 8.35% and 650 basis points above the cost of equity of 9.09%. This positive economic profit confirms that Union Pacific compounds shareholder value through its capital reinvestment program.
| Revenue | $6,864,000,000 |
|---|---|
| Cost of revenue | $3,739,000,000 |
| Gross profit | $3,125,000,000 |
| Operating expenses | $362,000,000 |
| Operating income | $2,763,000,000 |
| Non-operating items and tax | -$770,000,000 |
| Net income | $1,993,000,000 |
| Total assets | $69,698,000,000 |
|---|---|
| Cash | $1,266,000,000 |
| Current assets | $4,555,000,000 |
| Total liabilities | $51,231,000,000 |
| Current liabilities | $5,014,000,000 |
| Shareholders’ equity | $18,467,000,000 |
| Net income | $7,138,000,000 |
|---|---|
| Operating inflow | $9,603,000,000 |
| Depreciation and amortization | $2,465,000,000 |
| Operating cash flow | $9,290,000,000 |
| Operating outflow | $313,000,000 |
| Cash available | $10,318,000,000 |
| Beginning cash | $1,028,000,000 |
| Investing outflow | $3,762,000,000 |
| Capex | $3,791,000,000 |
| Financing outflow | $5,276,000,000 |
| Ending cash | $1,280,000,000 |
| Investing cash flow | -$3,762,000,000 |
| Financing cash flow | -$5,276,000,000 |
Source: SEC EDGAR · Filed 2026-02-06 · SEC EDGAR
| Revenue by business category | Revenue | Share | YoY |
|---|---|---|---|
| Cargo And Freight | $23.2B | 94.7% | 1.8% |
| Product And Service Other | $1.3B | 5.3% | -10.4% |
Point-in-time financial data used in the 2026-09-25 analysis.
| Period | Revenue | EBITDA | Net income | Operating cash flow | Free cash flow | Capex | Depreciation and amortization | Stock-based compensation | Share repurchases | Dividends paid | Net debt issuance | Investing cash flow | Financing cash flow | Beginning cash | Ending cash | Cash and investments | Total debt | Operating margin | ROIC | WACC | ROIC − WACC spread |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2016-12-31 | $19.9B | $9.5B | $4.2B | $7.5B | $4B | $3.5B | $2B | $82M | $3.1B | $1.9B | — | -$3.4B | -$4.2B | — | $1.3B | $1.3B | $15B | 36.3% | — | 5.5% | — |
| 2017-12-31 | $21.2B | $10.5B | $10.7B | $7.2B | $4B | $3.2B | $2.1B | $103M | $4B | $2B | — | -$3.1B | -$4.1B | $1.3B | $1.3B | $1.4B | $16.9B | 38.2% | — | 5.8% | — |
| 2018-12-31 | $22.8B | $10.8B | $6B | $8.7B | $5.2B | $3.4B | $2.2B | $96M | $8.2B | $2.3B | — | -$3.4B | -$5.2B | $1.3B | $1.3B | $1.3B | $22.4B | 37.3% | — | 5.9% | — |
| 2019-12-31 | $21.7B | $11B | $5.9B | $8.6B | $5.2B | $3.5B | $2.2B | $93M | $5.8B | $2.6B | — | -$3.4B | -$5.6B | $1.3B | $856M | $891M | $25.2B | 39.4% | — | 5.6% | — |
| 2020-12-31 | $19.5B | $10.3B | $5.3B | $8.5B | $5.6B | $2.9B | $2.2B | $73M | $3.7B | $2.6B | — | -$2.7B | -$4.9B | $856M | $1.8B | $1.9B | $26.7B | 40.1% | — | 3.9% | — |
| 2021-12-31 | $21.8B | $11.8B | $6.5B | $9B | $6.1B | $2.9B | $2.2B | $88M | $7.3B | $2.8B | — | -$2.7B | -$7.2B | $1.8B | $983M | $1B | $29.7B | 42.8% | — | 4.4% | — |
| 2022-12-31 | $24.9B | $12.6B | $7B | $9.4B | $5.7B | $3.6B | $2.2B | $99M | $6.3B | $3.2B | $3.8B | -$3.5B | -$5.9B | $983M | $987M | $1B | $33.3B | 39.9% | — | 6.4% | — |
| 2023-12-31 | $24.1B | $11.9B | $6.4B | $8.4B | $4.8B | $3.6B | $2.3B | $107M | $705M | $3.2B | -$591M | -$3.7B | -$4.6B | $987M | $1.1B | $1.1B | $32.6B | 37.7% | — | 6.5% | — |
| 2024-12-31 | $24.3B | $12.5B | $6.7B | $9.3B | $5.9B | $3.5B | $2.4B | — | $1.5B | $3.2B | -$1.4B | -$3.3B | -$6.1B | $1.1B | $1B | $1B | $31.2B | 40.1% | — | 6.9% | — |
| 2025-12-31 | $24.5B | $12.9B | $7.1B | $9.3B | $5.5B | $3.8B | $2.5B | — | $2.7B | $3.2B | $567M | -$3.8B | -$5.3B | $1B | $1.3B | $1.5B | $31.8B | 40.2% | — | 6.7% | — |
Union Pacific Corporation (UNP) trades at 19.3x forward earnings against a peer median of 18.3x. Its EV/EBITDA of 14.9x compares with a peer median of 14.7x. The comparison uses 4 peers: Lockheed Martin Corporation, CSX Corporation, Norfolk Southern Corporation and FedEx Corporation, as of 2026-09-25.
Union Pacific is currently in an active capital investment phase, with FY2025 capex of $3,791M representing 15.47% of revenue and a capex-to-depreciation ratio of 1.54x. This compares to the broader Class I rail industry capex-to-revenue benchmark of 6.5% and capex-to-depreciation benchmark of 1.63x. Current outlays fund major bottleneck elimination projects including the Houston terminal complex, Sunset corridor double-tracking, and Pacific Northwest siding extensions.56
The freight rail bull cycle is driven by nearshoring along the US-Mexico border, industrial manufacturing reshoring, and intermodal freight conversions from over-the-road trucking due to rail's 3-4x fuel advantage. In an upcycle, network velocity accelerates, train lengths expand, and incremental freight volume drops through to operating income at 50%+ incremental margins, lifting operating margins toward 42.8% as seen in FY2021.
The freight rail bear cycle is characterized by industrial destocking, automotive supply chain disruptions, and trucking freight overcapacity that depresses spot market truckload rates, causing marginal intermodal shippers to switch to highway transport. Rising labor costs (+7% per employee) and diesel price spikes squeeze the operating ratio, while heavy fixed infrastructure costs compress operating margins toward the 36%-37% historical trough.
Union Pacific occupies the premier western rail network franchise, originating and terminating 94.74% of revenue through its core Cargo and Freight franchise ($23,220M in FY2025). With a 40.17% operating margin, it outperforms eastern peers CSX (38.42%) and Norfolk Southern (35.30%), while freight logistics operators such as FedEx generate only 11.13% operating margins. Union Pacific's network scale and 100% car order fulfillment position it to capture industrial growth across ~200 active RFI development projects.3567
Given the house Sell rating and the significant downside from the analysis share price of $274.07 as of 2026-09-24 toward the synthesized fair value of $184.01, an equity allocation of 0% is recommended. Capital should be preserved or deployed into industrial opportunities offering positive margins of safety rather than holding an overvalued Class I rail position.4
Portfolio risk management requires strict discipline around position liquidation under a Sell recommendation. Investors holding legacy positions in Union Pacific should execute orderly exit programs using limit orders near the share price of $274.07 as of 2026-09-24 rather than waiting for earnings events that risk sharp multiple compression. The primary risk to an outright underweight or short stance is a sustained nearshoring freight boom driving carload volumes above expectation, which could temporarily support premium multiples (forward P/E of 19.34x). This risk is managed by maintaining strict trailing stop disciplines at 5% and monitoring carload volume trends across Mexican gateway interchanges.
Union Pacific shares trade at 19.34x forward earnings, trading at a premium to FedEx (13.40x) while trading slightly below CSX (20.67x). The share price of $274.07 sits at a 48.9% premium above our Fair value of $184.01, offering zero margin of safety against cyclical freight shocks.34
Although Union Pacific maintains a dependable $5.68 annual dividend per share (44.7% payout ratio), the dividend yield of roughly 2.1% is insufficient compensation for a 32.9% capital downside to our Fair value of $184.01. Capital depreciation risks far outweigh dividend cash flows over a 12 to 24 month horizon.46
Current market pricing of $274.07 implies an earnings per share growth rate of 7.6% over the next decade. With consensus projecting revenue growth slowing from 9.31% in FY2026 to 4.36% in FY2027, the railroad lacks the structural volume drivers needed to beat elevated market expectations.14
We recommend an outright Sell on Union Pacific Corporation shares. The report-date share price of $274.07 trades at a 48.9% premium above our Fair value of $184.01, implying that the market is paying for prolonged above-trend freight growth that Class I railroads historically cannot sustain through cyclical turns.4
While Union Pacific demonstrates excellent franchise durability with a 40.17% operating margin and eight consecutive quarters of record workforce productivity, operating headwinds from 7% employee wage inflation and $31.17B in total debt refinancing create downside risks. Investors should take advantage of current pricing to redeploy capital into lower-valuation opportunities.
Capture your own thesis, position size, and follow-up questions. Stays on this device, only you can see it.
The records this analysis drew on, as they stood when it was run.
Not every cited input appears here: internal calculations and intermediate model outputs have no external record, and some citations could not be matched to one.
Consensus expects 9.31% revenue growth in FY2026 and 4.36% in FY2027. Automotive weakness and intense highway trucking competition during a freight slump could push carload volume growth into negative territory, breaking top-line consensus expectations and reducing fair value by 15.0%.15
The valuation incorporates a 16.0x terminal P/E multiple relative to current forward P/E of 19.34x. If capex remains elevated near $3,791M and debt refinancing on $31,168,999,424 of debt increases interest expense, market multiples will de-rate 20% toward peer freight logistics levels such as FedEx (13.40x), reducing fair value by 20.0%.346
Negative top-line revenue growth signals broad-based industrial freight recession and truckload overcapacity capturing marginal rail freight volume.
Current:+9.31% (FY2026 consensus) / +4.36% (FY2027 consensus)
Alert if< -1.0% YoY
Capex-to-D&A remaining above 1.75x demonstrates prolonged capital cycle expansion and construction overruns, preventing free cash flow and Owner Earnings from normalizing toward $7.14B.
Current:1.54x ($3,791M capex / $2,465M D&A in FY2025)
Alert if> 1.75x on trailing 12-month basis
Contraction in carload volumes reveals loss of freight volume in intermodal or merchandise corridors to CPKC or trucking.
Current:100% car order fulfillment with slight car order uptick
Alert ifCarload volume contraction > 3.0% YoY for two consecutive quarters
Unmitigated wage escalation exceeding 8.0% outstrips rail volume productivity gains, creating an unrecoverable drag on operating income and forcing operating ratio degradation.
Current:+7.0% YoY in 2026Q2
Alert if> 8.0% YoY sustained without productivity offset
| Persistent union labor wage inflation and cost-per-employee growth | high | 6 to 18 months | Offsetting wage pressure through workforce productivity, Precision Scheduled Railroading discipline, and train length extensions.5 |
| Elevated capital expenditure requirements delaying free cash flow generation | medium | 24 to 36 months | Discretionary pacing of growth siding extensions and terminal investments once bottleneck projects are completed.56 |
Project EPS through the explicit advantage period, fade growth as competition catches up, and discount the full stream at cost of equity.
Apply a terminal P/E to the dated forward EPS path, then discount that future share value back to the analysis date.
Add depreciation to net income, subtract maintenance capex, divide by diluted shares, and apply a normalized valuation multiple.
Multiply the peer median PEG by this stock's forecast growth to derive an implied forward P/E, then apply it to forward EPS.
Discount the explicit dividend path and its Gordon-growth terminal value at cost of equity.
Solve for the growth rate that makes the model value equal the report-date share price.
The Bull case envisions accelerated industrial reshoring and nearshoring across Mexican border gateways, delivering above-trend carload growth in automotive, metals, and intermodal corridors. Increased freight density across existing train starts generates significant operating leverage, driving operating margins toward cyclical peak levels. Strategic bottleneck relief in Houston and double-tracking along the Sunset corridor enhance train velocity and network fluidity. Accelerated capital normalization unlocks higher free cash flow, enabling expanded share repurchases and supporting a valuation outcome of $226.07, with a probability of 20.0% and an expected return of -17.5% relative to $274.07.
Indicates volume demand across agricultural, industrial chemicals, and intermodal corridors; volume declines signal macroeconomic manufacturing slowdown or freight share loss to competing rail and highway networks.
Tracks whether elevated capacity spending on terminal expansions and sidings is transitioning toward maintenance levels; failure to normalize restricts discretionary free cash flow for buybacks and debt service.
Measures market share capture in Mexican nearshoring corridors; competitive pressure from rival single-line networks could constrain intermodal volume growth.
Reveals whether ongoing workforce productivity records are successfully neutralizing union contract wage escalation to protect operating margins.
| $29.02B |
| $29.95B |
| $30.70B |
| Operating income | $10.77B | $11.24B | $11.67B | $12.04B | $12.34B |
| NOPAT | $8.33B | $8.70B | $9.03B | $9.31B | $9.55B |
| Residual cash after reinvestment policy | $7.08B | $7.39B | $7.67B | $7.92B | $8.12B |
| Revenue growth | 9.3% | 4.4% | 3.8% | 3.2% | 2.5% |
| Operating margin | 40.2% | 40.2% | 40.2% | 40.2% | 40.2% |
| Tax rate | 22.6% | 22.6% | 22.6% | 22.6% | 22.6% |
| Reinvestment rate | 15.0% | 15.0% | 15.0% | 15.0% | 15.0% |
| Terminal growth | 2.5% | 2.5% | 2.5% | 2.5% | 2.5% |
Capital allocation follows a balanced framework prioritizing network safety, dividend growth, and opportunistic share repurchases. In FY2025, operating cash flows funded $3,791M in capital expenditures, $3,236M in common dividends (representing a 44.7% payout ratio on net income of $7,138M), and $2,679M in share buybacks. The dividend stands at $5.68 per share annualized, supported by a healthy debt-to-capital ratio of 16.07% and equity weight of 83.93%. Share repurchases have retired 14.3 million shares between FY2023 and FY2025, with diluted shares currently at 594,075,000. Debt management remains prudent despite total debt of $31,168,999,424, as over 81% of maturities extend beyond Year 5.
Product Cargo and Freight accounted for $23,220M of $24,510M total revenue (94.74%) in FY2025, generating operating income of $9,846M.
Because the vast majority of revenue is tied to captive rail corridors, the company can enforce fuel surcharges and avoid price discounting even in soft freight markets.
Total capex was $3,791M in FY2025 (1.54x D&A of $2,465M). Normalized maintenance capex of $2,464.15M (~65% of capex) leaves $1,326.85M in discretionary capacity buildouts.
Normalized Owner Earnings reach $7,138.85M ($12.02 per share) on GAAP net income of $7,138M, indicating that reported free cash flow understates normalized cash generation.
Diluted average share count contracted from 610,200,000 in FY2023 to 608,600,000 in FY2024 and 595,900,000 in FY2025, with shares outstanding reaching 594,075,000 as of September 2026.
Annual net share repurchases of ~1.0% compound EPS growth above revenue growth, although stock-based compensation of $107M in FY2023 provides minor dilution.
Total debt stands at $31,168,999,424 with a pre-tax cost of debt of 5.76%, while $1.52B matures within 12 months.
Refinancing low-coupon debt at higher prevailing rates will increase annual interest expense by $40M-$60M, slightly dampening net margin expansion.
| Margin |
|---|
| UNP | Union Pacific Corporation | $163.7B | 19.3x | 6.4x | 14.9x | 39.7% | — |
| LMT | Lockheed Martin Corporation | $120.9B | 16.0x | 1.6x | 14.2x | 89.2% | 12.0% |
| CSX | CSX Corporation | $87.0B | 20.7x | 6.0x | 15.4x | 24.4% | 38.4% |
| NSC | Norfolk Southern Corporation | $70.3B | 21.9x | 5.6x | 15.3x | 17.0% | 35.3% |
| FDX | FedEx Corporation | $66.2B | 13.4x | 0.7x | 8.1x | 14.8% | 11.1% |
| negative |
| Ongoing retirement of coal-fired electricity generation creates secular headwinds for Powder River Basin coal carloads, requiring Union Pacific to replace legacy bulk volumes with industrial chemicals, grain, and intermodal freight. |
| Surface Transportation Board Regulatory Demands for Common Carrier Service | negative | Heightened regulatory scrutiny on reciprocal switching, demurrage rules, and interchange access in major terminals such as Kansas City bounds pricing power and operational restructuring flexibility. |
| Exceeding 1.65x on a trailing 12-month basis |
| Reduce normalized Owner Earnings estimates by $300M-$500M to reflect chronic capital cycle friction and extended project completion timelines.6 |
| Carload Volume Growth | YoY carload volume declining by more than 2.0% | Cut forward top-line revenue growth projections below consensus baselines (below 4.0% for FY2026) to incorporate freight recessionary dynamics.1 |
| Cost per Employee Inflation | Year-over-year compensation per employee exceeding 6.0% | Model permanent operating ratio expansion of 100-150 basis points, reducing medium-term terminal value expectations. |
