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US Equities · Finance research note

UNP — Union Pacific Corporation

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2. Company Fundamentals

2.1 Competitiveness

Metric Value
Operating Margins 40.36%
Profit Margins 29.2%
Return on Equity 40.69%
Return on Assets 9.14%
Free Float 0.59B
Dividend Yield 2.06%
Short Int % Utilisation 5.56%

2.2 Growth

Metric Value
Revenue Growth 3.2%
Free Cash Flow 4.03B
EBITDA 15.02 (Ratio)
Enterprise Value 189.01B
EV/Revenue 7.65
EV/EBITDA 15.02

Revenue growth of 3.2% suggests mature or challenged top-line momentum.

2.3 Management

Role Metric
Consensus Rating N/A

2.4 Return

Metric Value
Expected Return (Ann.)* 39.72%
Risk / Std Dev (Ann.)* 22.18%
1-Year Price Return* 36.04%

Latest Market Data (as of 2026-08-14, US Eastern time):

Metric Value
Last Price $293.68
52-Week Range $210.84 – $315.99
Observation Count 251 trading days

The return and risk statistics use daily adjusted closes from the retrieved one-year series and annualise daily moments using 252 trading days. The last price is the latest regular-market price reported for the stated date. Source: Yahoo Finance market data.

DuPont Model Analysis

The DuPont model decomposes return on equity (ROE) into three operating and capital-structure drivers:

ROE = Net Margin × Asset Turnover × Equity Multiplier

The comparison uses the latest two comparable annual periods available for the issuer, with reported statement amounts shown in US$. Revenue and net income are income-statement flows; total assets and shareholders’ equity are year-end balance-sheet figures. This is a simplified year-end-balance DuPont comparison rather than an average-balance ROE calculation.

DuPont component Calculation FY2025 FY2024
Revenue Reported revenue $24.51B $24.25B
Net income Reported net income $7.14B $6.75B
Total assets Year-end reported balance $69.70B $67.72B
Shareholders’ equity Year-end reported balance $18.47B $16.89B
Net margin Net income ÷ revenue 29.12% 27.82%
Asset turnover Revenue ÷ total assets 0.3517x 0.3581x
Equity multiplier Total assets ÷ shareholders’ equity 3.7742x 4.0092x
ROE Net margin × asset turnover × equity multiplier 38.65% 39.95%

Source: Yahoo Finance annual statements. Values are based on the two latest comparable annual periods returned by the source; fiscal period labels use the statement period-end year.

2.5 FCFF DCF Valuation

Valuation basis: This research model follows a five-year, unlevered FCFF DCF. It starts from reported annual operating inputs, forecasts revenue and operating cash conversion under an explicit mechanical policy, discounts FCFF at WACC, applies a Gordon-growth terminal value, and bridges enterprise value to an indicative common-equity value per share. It is an analytical estimate rather than a recommendation or personalised target price.

Step 1 — Forecast Operating Profit and NOPAT

Reported operating input Value
Revenue $24.51B
Prior annual revenue $24.25B
EBIT $10.47B
Tax rate 22.13%
NOPAT = EBIT × (1 − tax rate) $8.16B
Forecast start-growth basis 1.07%
Forecast policy latest reported annual revenue growth, bounded to -10.00% / 15.00%

Step 2 — Calculate FCFF

Current FCFF building block Value
NOPAT $8.16B
Add: depreciation & amortisation $2.46B
Less: capital expenditure -$3.79B
Less/(add): working-capital cash-flow movement -$361.00M
Current unlevered FCFF $6.47B

Explicit FCFF forecast

Forecast year Revenue growth NOPAT D&A Capex Change in NWC FCFF Present value
1 1.07% $8.24B $2.49B -$3.83B -$364.87M $6.54B $6.27B
2 1.43% $8.36B $2.53B -$3.55B -$370.08M $6.97B $6.13B
3 1.79% $8.51B $2.57B -$3.26B -$376.69M $7.44B $6.01B
4 2.14% $8.69B $2.63B -$2.98B -$384.77M $7.96B $5.89B
5 2.50% $8.91B $2.69B -$2.69B -$394.39M $8.52B $5.79B

Step 3 — Determine the Discount Rate (WACC)

WACC input Value
Risk-free rate 4.71%
Equity risk premium assumption 5.50%
Beta 0.96
Cost of equity 10.02%
Pre-tax cost of debt 4.01%
WACC 8.95%
WACC validation within standard range

Step 4 — Estimate Terminal Value

Terminal-value input Value
Perpetuity growth rate 2.50%
Terminal value $135.40B
Implied terminal EV / EBITDA 9.58x
Terminal value as % of enterprise value 74.56%

Step 5 — Discount Cash Flows to Enterprise Value

Enterprise-value component Value
Present value of explicit FCFF $30.09B
Present value of terminal value $88.21B
Indicated enterprise value $118.30B
Discounting convention mid-year for explicit FCFF; terminal value discounted at year-end five

Step 6 — Convert Enterprise Value to Equity Value

Equity bridge Value
Indicated enterprise value $118.30B
Less: gross interest-bearing debt $32.82B
Add: cash and equivalents $1.52B
Add: affiliate investments $0.00
Less: minority interests $0.00
Indicated common equity value $87.00B

Step 7 — Calculate Indicative Value Per Share

Per-share output Value
Shares used 595,900,000.00
Share-count basis reported diluted weighted-average shares
Current market price $300.30
DCF indicative value per share $145.99
Indicative value vs. market price -51.39%

Model Integrity Checks

Check Result
Perpetuity growth is below the risk-free rate pass
Perpetuity growth is below WACC pass
WACC is within the configured operating-company range pass
Terminal-year FCFF is positive pass
Terminal capex converges to D&A pass
Terminal-value concentration within review band
Implied price differs from spot by more than 30% review required

2.6 Investor-Style Research Screen

Educational screen Result
Buffett-inspired cash-quality checks 4/4 evidenced checks
Lynch-inspired balance-and-growth checks 4/4 evidenced checks

Data lineage: Yahoo Finance public market and reported-statement data; retrieval timestamp: 2026-08-18 17:52:48.696271 UTC; latest reported fiscal period: 2025-12-31 00:00:00. Default assumptions: five-year forecast, mid-year discounting for explicit FCFF, a maximum 2.50% perpetuity-growth rate below both WACC and the risk-free rate, historical operating-ratio persistence, and capex convergence to D&A by year five. No sell-side consensus or management guidance is substituted for reported inputs. This is research and analysis only, not personalized financial advice.

2.7 Quantitative Factor Diagnostics

Model basis: Daily issuer USD excess returns are regressed in-sample using ordinary least squares on matching regional Fama–French factors. FF3 estimates market, size, and value loadings; FF5 adds profitability and investment. Coefficients are descriptive historical exposures, not predictions.

Estimation input Value
Regional factor set US
Factor-return currency USD
Issuer-return basis USD adjusted total return
Estimation window 2025-08-19 to 2026-06-30
Aligned daily observations 217
Minimum observation requirement 120
Currency conversion for HK listings not required

Fama–French Three-Factor and Five-Factor Results

Diagnostic FF3 FF5
Annualised alpha 1.27% 16.48%
Adjusted R² 0.19 0.26
Annualised residual volatility 19.74% 18.76%
Factor loading (t-statistic) FF3 FF5
Market excess return (Mkt-RF) 0.52 (4.44) 0.81 (6.37)
Size (SMB) 0.21 (1.34) 0.26 (1.62)
Value (HML) 0.77 (5.70) 0.52 (3.29)
Profitability (RMW) NM 0.56 (4.15)
Investment (CMA) NM 0.32 (1.35)

Definitions: Mkt-RF is the market return less the risk-free rate; SMB is small minus big; HML is high minus low book-to-market; RMW is robust minus weak profitability; CMA is conservative minus aggressive investment. Factor returns are sourced from the Kenneth R. French Data Library; issuer adjusted-return history is sourced from Yahoo Finance. For Hong Kong listings, adjusted HKD prices are converted into USD with daily USD/HKD closes before return calculation to match the USD regional factor basis. This is an in-sample historical regression; coefficients and t-statistics do not establish causation or predict future returns. This is research and analysis only, not personalized financial advice.

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