Is Union Pacific Fairly Priced After Recent Efficiency Drive and Infrastructure Investments?

• Wondering if Union Pacific is still worth climbing aboard at today’s price, or if most of the upside has already left the station? This breakdown is designed to help you decide.
• The stock has edged up 1.4% over the last week and 5.4% across the past month, but is only up 0.3% in the last year despite a solid 18.1% gain over three years and 25.8% over five years.
• Recent headlines have focused on Union Pacific’s ongoing efficiency drive, capacity investments across key freight corridors, and its role in supporting reshoring and infrastructure demand in the US. All of these factors shape how investors think about its long term growth runway. At the same time, the broader rail industry has been in the spotlight as a defensive play when economic conditions look uncertain, which helps explain some of the muted but steady share price action.
• On our framework, Union Pacific scores a 3 out of 6 on undervaluation checks, suggesting some value but not a screaming bargain. Next, we will walk through different valuation approaches and, by the end, look at a more nuanced way to judge whether the market is really getting this stock right.

Union Pacific delivered 0.3% returns over the last year. See how this stacks up to the rest of the Transportation industry.

Approach 1: Union Pacific Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a company is worth today by projecting the cash it can generate in the future and discounting those cash flows back to their value in today’s dollars.

For Union Pacific, the latest twelve month Free Cash Flow is about $6.1 billion. Analysts then project this figure forward, with Simply Wall St extending estimates beyond the analyst horizon using a two stage Free Cash Flow to Equity model. For example, projected Free Cash Flow in 2029 is around $9.3 billion, and further out year by year growth moderates as the business matures.

When all those future cash flows are discounted back and summed, the model arrives at an intrinsic value of roughly $237.52 per share. Compared with the current share price, this implies the stock is about 2.2% undervalued, which is a very small margin of safety and suggests the market is largely in line with the cash flow outlook.

Result: ABOUT RIGHT

Union Pacific is fairly valued according to our Discounted Cash Flow (DCF), but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Union Pacific.

Approach 2: Union Pacific Price vs Earnings

For profitable, mature businesses like Union Pacific, the Price to Earnings, or PE, ratio is a useful way to gauge how much investors are willing to pay today for each dollar of current earnings. In general, companies with stronger growth prospects and lower perceived risk tend to justify higher PE ratios, while slower growing or riskier businesses usually trade on lower multiples.

Union Pacific currently trades at around 19.5x earnings, which is below the broader Transportation industry average of about 27.6x, but above the 17.6x average of its closest peers. Simply Wall St also calculates a Fair Ratio of roughly 21.9x for Union Pacific, which is the PE multiple the stock might warrant after accounting for its specific earnings growth outlook, profit margins, industry positioning, market cap and risk profile. This Fair Ratio is more tailored than a simple comparison with peers or the industry, because it integrates both company level fundamentals and its operating context.

Comparing the current 19.5x PE to the 21.9x Fair Ratio suggests the shares are trading at a modest discount to what the fundamentals would justify, implying some valuation upside rather than excessive optimism.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Union Pacific Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives, a simple way to connect your view of a company’s story to a concrete financial forecast and a fair value estimate. On Simply Wall St’s Community page, Narratives let you describe why you think Union Pacific will grow or struggle, then translate that story into assumptions for future revenue, earnings and margins, and finally into a Fair Value you can compare against today’s share price to decide whether to buy, hold or sell. Because Narratives are updated dynamically as news, earnings and other data come in, your thesis does not stay static; it evolves with the business. For example, one Union Pacific Narrative on the platform might lean bullish, expecting efficiencies, new infrastructure and higher margin growth to justify a fair value near $294, while another more cautious Narrative, worried about trade, intermodal softness and regulatory risk, could point to a fair value closer to $213. These two perspectives can coexist side by side, giving you a clearer sense of where your own view fits on that spectrum.

Do you think there's more to the story for Union Pacific? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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