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 $229 base case fair value suggests the stock has pulled forward several years of execution.
internal valuation cross-checks is overly optimistic, valuing UNP at $291 based on extrapolation of peak multiples.
Union Pacific is a highly predictable, wide-moat duopoly generating massive operating cash flows. However, shares are currently priced for perfection, failing to account for the perpetual capital reinvestment required to maintain the network and the looming specter of regulatory margin caps.
Union Pacific is a highly predictable, wide-moat duopoly generating massive operating cash flows. However, shares are currently priced for perfection, failing to account for the perpetual capital reinvestment required to maintain the network and the looming specter of regulatory margin caps.
Duopoly market structure with BNSF in the Western U.S.
Immense barriers to entry due to high capital requirements
internal valuation cross-checks is overly optimistic, valuing UNP at $291 based on extrapolation of peak multiples.
Reduce. The current valuation does not provide a sufficient margin of safety for the inherent capital intensity.
Union Pacific Corporation, through its subsidiary, Union Pacific Railroad Company, operates in the railroad business in the United States. It offers transportation services for grain and grain products, fertilizers, food and refrigerated products, and coal and renewables to grain processors, animal feeders, and ethanol and renewable biofuel producers; and construction products, industrial chemicals, plastics, forest products, specialized products, metals and ores, petroleum, liquid petroleum gases, soda ash, and sand, as well as finished automobiles, automotive parts, and merchandise in intermodal containers. The company was founded in 1862 and is headquartered in Omaha, Nebraska.
A severe industrial recession coupled with prolonged labor disputes causes carload volumes to plummet. Operating leverage reverses, crushing margins, while the high fixed-cost base forces a reduction in share repurchases and freezes dividend growth.
Duopoly market structure with BNSF in the Western U.S.
Immense barriers to entry due to high capital requirements
Durable pricing power leading to consistent margin expansion
Cost advantage from unparalleled asset density
Economic profit is supported when reported returns exceed the company cost-of-capital hurdle.
Unavailable
FCFF DCF remains positive at the base case: base FCFF $6.9B after capex $3.7B, with terminal value at 63.8% of enterprise value. No FCF cliff is projected unless capex/ or materially resets.
Monitor earnings quality, guidance, and valuation-sensitive operating metrics.
Monitor earnings quality, guidance, and valuation-sensitive operating metrics.
Monitor earnings quality, guidance, and valuation-sensitive operating metrics.
Entering a steady-state maintenance phase where capital expenditures as a percentage of revenue normalize around 15%, maximizing free cash flow available for shareholder returns.
Nearshoring of manufacturing to North America drives secular volume growth in intermodal and industrial products. Supply chain normalization improves network velocity.
Macroeconomic softening reduces consumer spending and industrial production, hitting high-margin shipments. Inflationary labor contracts squeeze operating margins.
Entering a steady-state maintenance phase where capital expenditures as a percentage of revenue normalize around 15%, maximizing available for shareholder returns.
internal valuation cross-checks is overly optimistic, valuing UNP at $291 based on extrapolation of peak multiples.
Our explicit DCF highlights the drag of perpetual 15% CapEx/revenue on true owner earnings.
Reduce. While Union Pacific is a highly durable business with a wide economic moat, the current valuation at $264.65 does not adequately compensate investors for its capital intensity, regulatory risks, and macroeconomic cyclicality.
Upside case: The $229 base case fair value suggests the stock has pulled forward several years of execution. Downside case: internal valuation cross-checks is overly optimistic, valuing UNP at $291 based on extrapolation of peak multiples.
Capture your own thesis, position size, and follow-up questions. Stays on this device, only you can see it.
Industrial recession hits volumes, while labor inflation and regulatory constraints limit pricing action. Margin compression accelerates as operating leverage works in reverse. DDM implies a severe penalty if cash distribution growth stalls.
A multi-year industrial recession drastically reduces freight volumes, crushing revenue and reversing operating leverage.
Surface Transportation Board (STB) enforces reciprocal switching or caps pricing, structurally impairing margins.
Systemic network congestion or labor strike causes permanent modal shift to trucking for high-margin intermodal.
The five developments that would weaken our investment case.
A structural rise in rail network operating costs or worsening train velocity compresses operating margins, eroding precision scheduled railroading productivity gains and reducing core operational profitability.
Current:40.2% for the period ended 2025-12-31
Alert ifOperating margin falls below 38.0% for any fiscal year
Persistent carload and intermodal volume drops indicate broad industrial weakness and modal share losses to trucking, suppressing top-line revenue and creating unabsorbed fixed infrastructure costs across network corridors.
Current:1.1% for the period ended 2025-12-31
Alert ifRevenue growth falls below -2.0% over any trailing twelve-month period
Regulatory mandates requiring forced access or capping freight rates impair captive shipper pricing power, reducing return on capital and constraining long-term capital reinvestment into rail network capacity.
Current:16.1% as of the report's 2026-05-09 analysis date
Alert ifROIC drops below 13.0% as of any annual measurement date
Escalating maintenance capital expenditures and line maintenance costs squeeze gross profitability, diminishing discretionary cash generation and undermining the economics of heavy trackage and locomotive modernization.
Current:45.8% for the period ended 2025-12-31
Alert ifGross margin falls below 42.0% for any fiscal year
Declining operating cash generation threatens the safety of shareholder dividend payouts and repurchases, forcing reliance on balance sheet debt and risking credit rating downgrades during economic downcycles.
Current:1.301 as of the report's 2026-05-09 analysis date
Alert ifOperating cash flow to net income falls below 1.00 over any trailing twelve-month period
Each lens answers a different valuation question. Only included lenses set Fair value; floors and diagnostics provide context.
Apply a terminal P/E to the dated forward EPS path, then discount that future share value back to the analysis date.
Convert the revenue and margin path into after-tax free cash flow, discount the annual per-share amounts and at , then adjust for signed per current share.
Add depreciation to net income, subtract maintenance capex, divide by diluted shares, and apply a normalized valuation multiple.
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.
Nearshoring accelerates, driving sustained volume growth. Operational excellence pushes the operating ratio structurally below 58%. The company leverages its network density to extract maximum pricing power without STB intervention, justifying a higher terminal multiple.
Steady-state operation with GDP-plus pricing power offsetting flat to low-single-digit volume growth. CapEx remains disciplined at 15% of revenue, generating reliable FCF to fund the dividend and steady buybacks. Terminal multiple stabilizes at 16x.
Monitor earnings quality, guidance, and valuation-sensitive operating metrics.
Warning level: Operating margin falls below 38.0% for any fiscal year. A structural rise in rail network operating costs or worsening train velocity compresses operating margins, eroding precision scheduled railroading productivity gains and reducing core operational profitability.
Warning level: Revenue growth falls below -2.0% over any trailing twelve-month period. Persistent carload and intermodal volume drops indicate broad industrial weakness and modal share losses to trucking, suppressing top-line revenue and creating unabsorbed fixed infrastructure costs across network corridors.
Warning level: ROIC drops below 13.0% as of any annual measurement date. Regulatory mandates requiring forced access or capping freight rates impair captive shipper pricing power, reducing return on capital and constraining long-term capital reinvestment into rail network capacity.
Warning level: Gross margin falls below 42.0% for any fiscal year. Escalating maintenance capital expenditures and line maintenance costs squeeze gross profitability, diminishing discretionary cash generation and undermining the economics of heavy trackage and locomotive modernization.
Warning level: Operating cash flow to net income falls below 1.00 over any trailing twelve-month period. Declining operating cash generation threatens the safety of shareholder dividend payouts and repurchases, forcing reliance on balance sheet debt and risking credit rating downgrades during economic downcycles.
| — |
| $24.88B |
| $24.12B |
| $24.25B |
| $24.51B |
| -0.5% |
| Gross profit | — | $11.21B | $10.53B | $11.04B | $11.22B | +0.0% |
| Operating income | — | $10.34B | $9.57B | $10.06B | $10.48B | +0.4% |
| Net income | — | $7.00B | $6.38B | $6.75B | $7.14B | +0.7% |
| EPS (diluted) | $9.95 | $11.21 | $10.45 | $11.09 | $11.98 | +4.8% |
| EBITDA | — | $12.59B | $11.89B | $12.46B | $12.94B | +0.9% |
| R&D | — | — | — | — | — | — |
| SG&A | — | — | — | — | — | — |
Capital allocation should be evaluated against reinvestment needs, balance-sheet strength, and shareholder returns.
| Revenue | 24,510,000,000 |
|---|---|
| Cost of revenue | 13,290,000,000 |
| Gross profit | 11,220,000,000 |
| Operating expenses | 1,374,000,000 |
| Operating income | 9,846,000,000 |
| Non-operating items and tax | -2,708,000,000 |
| Net income | 7,138,000,000 |
| 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 |
Point-in-time financial data used in the 2026-05-09 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 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022-12-31 | 24.9B | 12.6B | 7B | 9.4B | 5.7B | 3.6B | 2.2B | — | 6.3B | 3.2B | 3.8B | — | — | — | — | 973M | 35B | 39.9% | — | — | — |
| 2023-12-31 | 24.1B | 11.9B | 6.4B | 8.4B | 4.8B | 3.6B | 2.3B | — | 705M | 3.2B | -591M | — | — | — | — | 1.1B | 34.2B | 37.7% | — | 7.2% | — |
| 2024-12-31 | 24.3B | 12.5B | 6.7B | 9.3B | 5.9B | 3.5B | 2.4B | — | 1.5B | 3.2B | -1.4B | — | — | — | — | 1B | 32.5B | 40.1% | — | 7.5% | — |
| 2025-12-31 | 24.5B | 12.9B | 7.1B | 9.3B | 5.5B | 3.8B | 2.5B | — | 2.7B | 3.2B | 567M | — | — | — | — | 1.3B | 32.8B | 40.2% | — | 7.1% | — |
UNP trades at 19.3x forward earnings against a peer median of 23.1x; EV/EBITDA of 14.9x against a peer median of 20.4x; 6 peers.
| Wait for a broader market pullback or railroad-specific multiple compression to approach the $183 downside case before accumulating. |
| Norfolk Southern Corporation |
| 23.1x |
| 5.8x |
| 15.5x |
| 17.6% |
| 32.3% |
| WAB | Westinghouse Air Brake Technologies Corporation | 21.9x | 3.9x | 20.4x | 11.3% | 19.0% |
| CAT | Caterpillar Inc. | 30.6x | 5.8x | 31.1x | 51.3% | 18.2% |
| GE | GE Aerospace | 34.3x | 6.4x | 29.1x | 45.4% | 20.2% |
