VALUATION HIGHLIGHTS

1. Industrial Freight constitutes 35% of the Trefis price estimate for Union Pacific Corporation's stock.
2. Premium Freight constitutes 31% of the Trefis price estimate for Union Pacific Corporation's stock.
3. Bulk Freight constitutes 27% of the Trefis price estimate for Union Pacific Corporation's stock.

WHAT HAS CHANGED?

1. Norfolk Southern Acquisition
   • Union Pacific is acquiring Norfolk Southern in a cash and stock deal valued at $85 billion. The acquisition would create the first transcontinental railroad in the U.S.
   • As part of the deal, each Norfolk Southern shareholder will receive one Union Pacific share and cash for every NSC share they hold, valuing the shares at $320 each. The merger is subject to regulatory approval and is expected to close by early 2027.

2. UNP Stock vs. S&P 500 Performance
   • The changes in UNP stock over the recent years have been far from consistent. Returns for the stock were 23% in 2021, -16% in 2022, 22% in 2023, and -5% in 2024.
   • In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, 24% in 2023, and 23% in 2024 — indicating that UNP underperformed the S&P in 2021, 2023 and 2024.

3. Q2 2025 Performance
   • Union Pacific's top line was up 2% y-o-y at $6.15 billion in Q2 2025, led by higher volume and partly offset by lower fuel surcharges. Looking at the bottom line, the company posted a 15% rise in its EPS, which stood at $3.15 per share.

4. Trends In Coal Shipments
   • With the increased use of cleaner sources of energy, such as natural gas, the demand for coal has dropped drastically over the last few years. Consequently, coal shipments have witnessed a sharp decline in recent years. However, if there is any sharp movement in natural gas prices, it would result in higher coal demand.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

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: Our current projection for Union Pacific's EBITDA margin is a modest increase from 50.1% in 2024 to 57% by the end of our Trefis forecast period. This improvement is expected to be driven by the company's ongoing efforts to enhance productivity.
  However, if Union Pacific fails to improve its margin and it instead declines to 48% by the end of our forecast period (contrasting with our base case of 57%), our Trefis price estimate could face a potential decrease of over 15%

Industrial Freight

• UNP's Industrial Carloads: Union Pacific's Industrial carloads are currently expected to rise from 2.2 million in 2024 to 2.9 million by 2031 in our forecast. However, a significant recovery in the economy could drive a considerable expansion in national industrial output. If UNP's Industrial carloads were to exceed 3.5 million by the end of our forecast period, as opposed to the 2.9 million in our base scenario, we would see a potential upside of over 10% 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.

BUSINESS SUMMARY

Union Pacific Corporation is the premier freight railroad network in the United States, with Union Pacific Railroad (UPRR) as its largest subsidiary and the nation's biggest class-1 railroad. UPRR's extensive route system spans much of the central and western US, from Chicago and New Orleans westward, covering nearly 23 states. A major competitor in this territory is Burlington Northern Santa Fe Corporation (BNSF).

A key advantage for Union Pacific is its significant ownership of its rail infrastructure. The company operates over 32,693 miles of track, with 26,110 miles owned and the rest through agreements. Union Pacific operates on vital north-south routes and uniquely serves all six primary rail gateways to Mexico. It also connects with Canadian rail systems for interchanging freight.

Union Pacific Railroad Company's freight business encompasses various sectors, including Agricultural Products, Automotive, Chemicals, Energy, Industrial Products, and Intermodal. In addition to its core freight operations, the company also manages a substantial commuter rail service in the Chicago area.

Union Pacific's profitability is driven by the volume and pricing of its freight contracts. Its main costs include labor, fuel, utilities, and track upkeep. Major customers for Union Pacific include steamship lines, vehicle manufacturers, agricultural firms, utilities, intermodal companies, and chemical producers.

SOURCES OF VALUE

Industrial Freight is the most significant contributor to Union Pacific's value.

Well connected to major industrial hubs

Union Pacific's rail network provides crucial connections between key U.S. industrial centers in the Midwest and the Western states and various export points, including terminals in the Pacific Northwest, along the Gulf Coast, and into Mexico. Furthermore, the company's service extends to major domestic markets throughout the Midwest, West, South, and Rocky Mountain regions. This extensive network positions Union Pacific favorably to capitalize on U.S. industrial production and its ability to compete in global markets.