UNP
IndustrialsUnion Pacific Corporation
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XBRL · SEC EDGAR2012–2025(14yr)| Metric | FY 2012 | FY 2013 | FY 2014 | FY 2015 | FY 2016 | FY 2017 | FY 2018 | FY 2019 | FY 2020 | FY 2021 | FY 2022 | FY 2023 | FY 2024 | FY 2025Latest | YoY |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenue | $20.9B | $22.0B | $24.0B | $21.8B | $19.9B | $21.2B | $22.8B | $21.7B | $19.5B | $21.8B | $24.9B | $24.1B | $24.3B | $24.5B | +1.1% |
| Operating Income | $6.7B | $7.4B | $8.8B | $8.1B | $7.3B | $8.1B | $8.5B | $8.6B | $7.8B | $9.3B | $9.9B | $9.1B | $9.7B | $9.8B | +1.4% |
| Operating Margin | 32.2% | 33.9% | 36.5% | 36.9% | 36.5% | 38.0% | 37.3% | 39.4% | 40.1% | 42.8% | 39.9% | 37.7% | 40.1% | 40.2% | +0.1pp |
| Net Income | $3.9B | $4.4B | $5.2B | $4.8B | $4.2B | $10.7B | $6.0B | $5.9B | $5.3B | $6.5B | $7.0B | $6.4B | $6.7B | $7.1B | +5.8% |
| Net Margin | 18.8% | 20.0% | 21.6% | 21.9% | 21.2% | 50.4% | 26.1% | 27.3% | 27.4% | 29.9% | 28.1% | 26.4% | 27.8% | 29.1% | +1.3pp |
| Free Cash Flow | $2.4B | — | — | — | — | $4.0B | $5.2B | $5.2B | $5.6B | $6.1B | $5.7B | $4.8B | $5.9B | $5.5B | -6.7% |
| FCF Margin | 11.6% | — | — | — | — | 18.8% | 23.0% | 23.8% | 28.7% | 28.0% | 23.1% | 19.8% | 24.3% | 22.4% | -1.9pp |
| EPS (Diluted) | $8.27 | $9.42 | $5.75 | $5.49 | $5.07 | $13.36 | $7.91 | $8.38 | $7.88 | $9.95 | $11.21 | $10.45 | $11.09 | $11.98 | +8.0% |
1. THE BIG PICTURE
Union Pacific is currently an efficiency engine running on a slowing track. While it maintains the highest profit margins among its transportation peers, its future is now inextricably tied to a high-stakes attempt to merge with Norfolk Southern—a move that would create a transcontinental giant but also introduces massive regulatory and financial liabilities (8-K).
2. WHERE THE RISKS HIT HARDEST
Union Pacific’s primary competitive strength—its Network Reach, specifically its exclusive access to all six Mexico gateways—is directly threatened by Regulatory and Tariff Exposure. Management notes that 2025 import tariffs and retaliatory measures have already increased the cost of purchased goods (10-K Item 1A). If trade tensions escalate, the very cross-border traffic that differentiates Union Pacific from other Class I railroads could become a liability.
Furthermore, Union Pacific Corporation's Operational Strategy of "Safety, Service, and Operational Excellence" is being tested by Demand Volatility. In the most recent quarter, revenue carloads fell by 4% (8-K). Because railroad operations are capital-intensive, these volume drops force "costly resizing," including the expensive storage of locomotives and workforce adjustments that undermine the efficiency gains management is trying to achieve (10-K Item 1A).
3. WHAT THE NUMBERS SAY TOGETHER
The financial data reveals a company using every available lever to grow earnings while the core business of moving freight stalls. In the fourth quarter of 2025, revenue actually fell by 1%, yet earnings per share (EPSEPSEarnings Per Share — the company's net profit divided by its share count; the most common per-share profitability metric) jumped 7% (8-K). This disconnect was not driven by more trains; it was fueled by $234 million in one-time land sales and "core pricing gains" that offset the 4% decline in carload volume (8-K).
While Union Pacific leads its peer group with a 56.4% gross margin and a 24.9% free cash flow (FCFFCFFree Cash Flow — cash left after paying for operations and capital investments; what the company can actually spend, save, or return to shareholders) margin (XBRL), its top-line growth of 1.1% over the last twelve months lags significantly behind equipment-focused peers like Wabtec (+7.5%). The market remains somewhat wary of this transition; short interest stands at 4.7% of the float, with 6.7 days to cover, suggesting a notable contingent of investors is betting against the current trajectory (Yahoo Finance).
4. IS IT WORTH IT AT THIS PRICE?
At 18.6x forward earnings, Union Pacific trades at a modest discount to the peer median of 19.7x (Yahoo Finance). According to CAPM analysis, the market is pricing in roughly 4.4% long-term growth. This expectation is well within Union Pacific Corporation’s stated goal of mid-single-digit EPSEPSEarnings Per Share — the company's net profit divided by its share count; the most common per-share profitability metric growth for 2026 and its three-year target of high-single to low-double-digit growth through 2027 (8-K).
However, the "fairness" of this price depends entirely on the Norfolk Southern transaction. If the merger proceeds, the 18.6x multiple may look cheap for a transcontinental monopoly. If it fails, the $2.5 billion termination fee and the $29.5 billion in existing net debt (XBRL) could quickly make that multiple look expensive. If growth were to slow to a GDP-pace of 2.5%, the justified multiple would drop to 13.8x, representing roughly 26% downside from current levels (CAPM analysis).
5. WHAT WOULD CHANGE THIS VIEW?
- Constructive if carload volumes (currently -4%) return to positive growth, proving that Union Pacific Corporation can grow without relying on one-time land sales or aggressive price hikes.
- Cautious if the Surface Transportation Board (STB) signals opposition to the Norfolk Southern merger, or if merger-related costs (already $30 million in Q4) begin to significantly erode the 28.4% net margin.
6. BOTTOM LINE
Structural Advantage: A dominant Western U.S. rail network with exclusive, multi-point access to the Mexican border and industry-leading free cash flow conversion.
Bottom Line: Union Pacific is a highly profitable defensive play whose near-term valuation is capped by the massive execution and regulatory risks of its transcontinental merger.
1. Top 5 Material Risks
- Demand Volatility: Significant reductions in demand for commodities or shifts in consumer preferences necessitate costly resizing of operations, including workforce adjustments and equipment storage, which directly impact operating costs and liquidity.
- Merger Integration and Failure: The pending merger with Norfolk Southern carries risks of substantial transaction costs, potential loss of revenues during the transition, and the possibility of paying a $2.5 billion termination fee if the deal is not completed.
- Regulatory and Tariff Exposure: Union Pacific Corporation faces risks from legislative or regulatory changes by bodies like the Surface Transportation Board (STB), which can expand pricing regulation and reduce the viability of capital spending. Additionally, 2025 U.S. import tariffs and retaliatory measures have increased costs for purchased goods and services.
- Cybersecurity and Technology: Reliance on complex information technology systems, including Positive Train Control (PTC), exposes Union Pacific Corporation to service interruptions, safety failures, and unauthorized access to critical data, which could result in regulatory fines and financial losses.
- Workforce Disruptions: As a majority-unionized workforce, Union Pacific Corporation is susceptible to strikes, slowdowns, or lockouts, which can compromise service reliability and increase costs for wages, health care, and other benefits.
2. Company-Specific Risks
- Hazardous Material Liability: Union Pacific Corporation is subject to common carrier obligations requiring the transport of hazardous materials (e.g., crude oil, ethanol, chlorine), creating exposure to environmental remediation and personal injury claims that may exceed insurance coverage.
- Key Supplier Dependency: Union Pacific Corporation relies on a limited number of domestic locomotive and steel rail suppliers; bankruptcy or insolvency of these partners could lead to significant cost increases and difficulty obtaining materials necessary for network maintenance and capacity expansion.
- Geopolitical Trade Sensitivity: A significant portion of revenue is tied to international markets, particularly Mexico, Canada, and Southeast Asia; sustained trade interruptions or currency valuation changes in these regions could materially affect import/export volumes.
- Climate Change and Infrastructure: The vast rail network is physically exposed to severe weather events (e.g., floods, fires, landslides), which can cause line outages and necessitate significant unplanned capital expenditures.
3. Regulatory/Legal Risks
- Environmental Compliance: Union Pacific Corporation faces extensive federal, state, and local regulations regarding air emissions, water discharge, and waste disposal, with potential liability extending to previously owned or leased properties.
- STB Oversight: The Surface Transportation Board (STB) maintains authority over common carrier regulation, revenue adequacy calculations, and the use of embargoes; the STB recently rejected the merger application with Norfolk Southern as incomplete, requiring a revised filing.
- Litigation Exposure: Union Pacific Corporation is subject to ongoing securities class action and derivative lawsuits related to the merger agreement, which can divert management resources and result in monetary damages.
- Leverage Covenants: Future financing agreements related to the merger are expected to include leverage covenants; failure to comply could result in default, allowing lenders to accelerate debt maturity and foreclose on collateral.
4. Financial Impact Map
Demand Volatility → Operating Income → Increased unit operating costs and storage expenses for locomotives and rail cars. Merger Termination → Cash and Cash Equivalents → Potential $2.5 billion termination fee payable to Norfolk Southern. Tariff Activity → Purchased Goods and Services → Increased costs for rail purchases and other materials during fiscal years 2025 and 2026. Cybersecurity Incident → Operating Expenses → Potential regulatory fines, remediation costs, and loss of revenue from service interruptions. Increased Indebtedness → Interest Expense → Higher cash requirements to service debt levels following the merger, potentially reducing funds available for dividends and share repurchases.
Recent Filings
| Form | Filed | Period |
|---|---|---|
| 10-K | Feb 2026 | Dec 2025 |
| 8-K | Jan 2026 | — |
| 10-Q | Oct 2025 | Sep 2025 |
| 14A | Mar 2025 | — |
AI-extracted key facts from press releases and SEC filings. Significance 1–10.
Union Pacific Merger With Norfolk Southern Faces Regulatory Scrutiny and Potential $2.5B Breakup Fee
- ▸Proposed merger with Norfolk Southern currently under regulatory review
- ▸Union Pacific may withdraw if regulatory conditions are deemed too restrictive
- ▸Potential $2.5 billion breakup fee if merger is terminated
- ▸Q1 2026 revenue $6.22B, net income $1.70B, EPS $2.87
- ▸Industry peers including CSX opposing deal over competition concerns
RBC Raises Q1 EPS Estimate for Union Pacific to $2.90, Lowers Price Target to $273
- ▸RBC raised Q1 EPS estimate by $0.06 to $2.90
- ▸RBC lowered price target to $273 from $280
- ▸Q1 rail volumes trending ahead of consensus expectations
- ▸Analyst cites increased risk regarding regulatory deal approvals
- ▸Evercore ISI previously upgraded stock to Outperform with $262 target
Union Pacific CEO Vena confirms network capacity to handle projected merger-related traffic growth
- ▸Projected 11% volume surge from merger with Norfolk Southern
- ▸Targeting diversion of 2 million truckloads annually to rail
- ▸Active trains reduced 24% since 2019 via Precision Scheduled Railroading
- ▸Train length increased 25% since 2019
- ▸Planned $1.1 billion investment in main line and terminal improvements
Evercore ISI upgrades Union Pacific to Outperform, raises price target to $262
- ▸Evercore ISI upgraded UNP to Outperform from In Line
- ▸Price target increased to $262 from $260
- ▸Analysts cite strong volume growth and robust margins
- ▸Railroads recapturing freight share from trucking due to rising road-haul rates
- ▸National van spot rates +20% YoY to $2.43 per mile in February
Union Pacific Q4 revenue $6.09B flat YoY, misses operating income and EBITDA estimates
- ▸Union Pacific Q4 revenue $6.09B, flat YoY, in line with estimates
- ▸Union Pacific missed adjusted operating income and EBITDA consensus estimates
- ▸XPO Q4 revenue $2.01B, +4.7% YoY, beat estimates by 2.9%
- ▸Transportation and logistics sector stocks down 7% on average post-earnings
- ▸Union Pacific shares +4.9% since earnings report, trading at $242.25