Union Pacific Corporation (UNP) Last Update 5/1/21
% of Stock Price
Gross Profits
Free Cash Flow
Union Pacific Corporation
Bulk Freight
Net Debt
12.8% $37
Trefis Price
Top Drivers for Period
Key Drivers
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Potential upside & downside to trefis price

Union Pacific Corporation Company


  1. Industrial Freight constitutes 35% of the Trefis price estimate for Union Pacific Corporation's stock.
  2. Premium Freight constitutes 32% of the Trefis price estimate for Union Pacific Corporation's stock.
  3. Bulk Freight constitutes 28% of the Trefis price estimate for Union Pacific Corporation's stock.


  1. Impact of Coronavirus On Union Pacific's Stock
    • Union Pacific stock lost more than 37% – dropping from $180 at the beginning of the year to below $115 in late March – then spiked 93% to around $202 now (as of Apr 30, 2021). That means it is above the pre-pandemic levels.

      Why? While the Covid-19 outbreak and associated lockdowns resulted in an uncertain outlook for the broader markets, the multi-billion-dollar Fed stimulus announced in late March 2020 helped the markets stage a strong recovery. Now with vaccination programs underway in Q2 2021, investors are now expecting a quicker economic rebound with economies opening up gradually, which will bode well for Union Pacific's transportation business.

      Overall, 2020 saw sales and earnings decline for railroad companies. The Covid-19 crisis had a significant impact on transportation demand, due to an overall decline in manufacturing, lower consumer demand, lower oil prices impacting production and transportation of oil and related products, as well as lower natural gas prices resulting in lower demand for coal.

  2. Q1 2021 Performance
    • Union Pacific's top line declined 4% y-o-y to $5.0 billion in Q1 2021, primarily due to continued headwinds in industrial freight. Looking at the bottom line, the company posted a 7% decline in its EPS, which stood at $2.00 per share. EPS decline was higher due to margin contraction, owing to the increased operating costs during the pandemic.
  3. Declining Coal Shipments
    • Natural gas prices have been on a decline, especially in 2020. With falling natural gas prices, demand for coal has fallen. Moreover, UNP lost a coal contract to one of its competitors. With the increased use of cleaner sources of energy such as natural gas, the demand for coal has dropped significantly over the last few years. Consequently, the coal shipments have witnessed a sharp decline. While the exports aided the overall coal shipments for railroad companies in 2018, this changed in 2019, with the trade tensions, and 2020 further marked a decline, owing to lower demand for power amid the Covid-19 crisis.
  4. Slowdown In Automotive
    • Since the beginning of 2017, the demand for light vehicles has slowed down, despite large discounts being offered by manufacturers to clear their previous inventories. This is largely because the pace at which cars or trucks are being purchased is not the same as the pace at which they are being replaced. Consequently, there is a void in the demand for these vehicles, which is visible from the decline in their sales. Now due to coronavirus crisis, several automotive plants were shut or operating at a low capacity for a few months in 2020, thus impacting the overall output. Since the railroad sector is closely correlated to the automobile industry, companies such as Union Pacific have witnessed a decline in the auto parts shipments in the recent past.


Below are key drivers of Union Pacific's value that present opportunities for upside or downside to the current Trefis price estimate:

  • Union Pacific's EBITDA margin: We currently forecast Union Pacific's EBITDA margin to increase slightly from 52% in 2020 to a little over 54% by the end of the Trefis forecast period, driven by the company's productivity improvement initiatives.
    There could be a downside of over 10% to the Trefis price estimate if the company is unable to expand margin, and it falls to 47% by the end of our forecast period, as opposed to rising to 54% in our base case forecast.

Industrial Freight

  • UNP's Industrial Carloads: We currently forecast UNP's Industrial carloads to rise from 2.0 million in 2020 to 2.6 million in 2027. However, a strong recovery post Covid-19 crisis could significantly boost the overall industrial output in the country. If UNP's Industrial carloads rise to over 3.5 million by the end of our forecast period, as opposed to 2.6 million in the base case, it would imply over 10% upside to our price estimate.

For additional details, select a driver above or select a division from the interactive Trefis split for Union Pacific at the top of the page.


Union Pacific Corporation is the leading railroad network in the United States, engaged primarily in freight transportation. Union Pacific Railroad (UPRR), the largest class-1 railroad in the United States, is the core subsidiary of Union Pacific Corporation. UPRR's route map covers most of the central and western United States, west of Chicago and New Orleans, covering nearly 23 states. Union Pacific competes with Burlington Northern Santa Fe Corporation (BNSF) which covers much of the same territory.

The company-owned tracks are a major strength of Union Pacific. The company operates on 32,340 miles of track out of which 26,094 is owned and the remainder is pursuant to trackage rights or leases. Union Pacific operates on key north/south corridors and is the only railroad to serve all six major gateways to Mexico. UP also interchanges traffic with the Canadian rail systems.

Union Pacific Railroad Company’s business mix includes Agricultural Products, Automotive, Chemicals, Energy, Industrial Products, and Intermodal. Although the company's primary role is transporting freight, it also runs a substantial commuter train operation in Chicago.

Union Pacific's earnings depend upon the volume of freight contracts it sells and the price of those contracts, while its expenses primarily consist of labor, fuel costs, utilities costs, and track maintenance. The largest of Union Pacific's customers include steamship lines, vehicle manufacturers, agricultural companies, utilities, intermodal companies, and chemical manufacturers.


Industrial Freight is the largest contributor to Union Pacific's value at around 35%.

Well connected to major industrial hubs

Union Pacific's rail network links the major U.S. industrial hubs in the Midwest and the Western U.S. to export terminals in the Pacific Northwest, the Gulf Coast and Mexico. In addition, the company also serves major domestic markets in the Midwest, West, South and Rocky Mountain states. The company is well placed to benefit from the U.S. industrial output and its competitiveness in international markets.


Declining coal shipments

Natural gas prices haven't seen any significant growth in the recent years. With stable prices, demand for coal has fallen. UNP's coal freight revenues have been impacted by a double digit decline in shipments over the recent years. While coal exports helped railroad companies in 2017 and 2018, the trend reversed in 2019 and continued the downward trajectory in 2020.

In terms of volume, we forecast low single digit growth in the near term, as an expected decline in domestic coal shipments will likely be offset by strong export volume growth. However, any significant growth is unlikely, given that the company is facing pricing headwinds of late. In fact, coal shipments were down 3% in the previous quarter. Also, the company has lost some of the coal business, which is impacting the overall segment performance. With gas prices being more attractive, the dependency on coal as an energy source continues to come down. In fact, as per the EIA estimates of 539 million short tons (mst) coal consumption in 2020, marked the year with the lowest coal consumption over the last 40 years.