Union Pacific (UNP) Margin Expansion Outpaces Expectations, Reinforcing Bullish Narratives on Profit Quality

Union Pacific (UNP) posted notable results, with earnings up 6.8% over the past year and a net profit margin of 28.4%, outpacing last year's 26.9%. Over the past five years, the company’s earnings have grown at an average rate of 3.8% per year. Looking ahead, forecasts point to 9.8% annual EPS growth and 7.1% yearly revenue growth. With a consistent track record of expanding margins and steady profit growth, investors are taking note of the company’s continued ability to deliver high-quality earnings.

See our full analysis for Union Pacific.

Now let’s put these earnings numbers up against the market’s main narratives, highlighting where the consensus holds up and where the story could be shifting.

See what the community is saying about Union Pacific

Efficiency Initiatives Boost Net Margins

• Union Pacific's net profit margin increased to 28.4% this year, up from 26.9% the year before, reflecting notable progress in cost control and efficiency improvements.
• According to the analysts' consensus view, ongoing rollouts of energy management systems and operational optimization are expected to drive further gains in operational efficiency.
  • Capacity additions in Houston and Phoenix set the stage for future revenue growth and align with efficiency trends.
  • Analysts note that advances in core pricing and technology adoption could support net margin stability even as the industry faces cost pressures.
• For a deep dive into how efficiency upgrades and margin expansion shape the consensus outlook on Union Pacific, see the latest analyst narrative. 📊 Read the full Union Pacific Consensus Narrative.

Growth Guidance and Share Count Reduction

• Analysts forecast Union Pacific's earnings to rise from $6.9 billion now to $8.3 billion by September 2028, with earnings per share boosted further by expected annual share count reductions of 2.18% over the next three years.
• Consensus narrative notes that these projections rest on stable demand and expanding infrastructure, but highlight tension because some more cautious analysts project earnings at just $7.2 billion for the same period.
  • To meet the consensus price target, Union Pacific would need to trade at a PE ratio of 21.9x in 2028, compared to its current 18.8x.
  • While the path is positive, there is a divergence in analyst assumptions about the pace of future profit acceleration and the impact of share repurchases on per-share outcomes.

Valuation Stands Out Versus Industry Benchmarks

• Union Pacific currently trades at $220.04, below its DCF fair value of $232.56 and under its consensus price target of $261.12; its PE ratio of 18.8x is not only lower than the US Transportation industry average (26.4x) but sits slightly above the peer group average (17.6x).
• The analysts' consensus view highlights that ongoing profit growth and strong cash returns have helped support this valuation. However, slower growth compared to the broader US market and a minor risk linked to the company’s financial position still affect sentiment.
  • Investors watching for a rerating toward the consensus price target must weigh the pace of margin expansion against industry momentum.
  • Given Union Pacific's attractive dividend and history of steady performance, valuation could become more compelling if growth accelerates as forecasted.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Union Pacific on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

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A great starting point for your Union Pacific research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.

See What Else Is Out There

Despite solid profit growth, Union Pacific lags the broader US market’s growth pace and faces minor sentiment risks tied to its financial position.

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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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