Union Pacific Valuation in Focus After Trump Backs $72B Norfolk Southern Merger Proposal

Thinking about what to do with Union Pacific stock right now? You are not alone. Whether you are eyeing new opportunities or reassessing your portfolio, there is a lot riding on the rails of this classic transport giant. Over the last year, UNP shares have seen their ups and downs, with a recent 7-day dip of 4.8% but a more encouraging 4.8% jump over the past month. And if you zoom out, Union Pacific's 3-year return sits at 24.9%, though the 5-year mark comes in at a more modest 20.0% gain. These moves are not happening in isolation; there is real drama and potential at play.

The company is at the center of major merger plans, with Union Pacific's proposed acquisition of Norfolk Southern making headlines and shaking up investor sentiment. Presidential support and ongoing regulatory twists are adding fuel to the fire, occasionally pushing the stock in both directions as signals about the deal's future trickle out. All of this has investors debating whether fresh risks are creeping in, or whether a new wave of growth could be just around the bend.

But what about value? If you are weighing an entry or exit, the numbers cannot be ignored. On a standard valuation checklist, such as price ratios, cash flows, and profitability, Union Pacific comes in with a value score of 2 out of 6, meaning it looks undervalued in two key respects. Over the next sections, I will walk you through each approach, from the most common metrics to some alternatives that get at the heart of whether Union Pacific is a good buy. And at the end, I will share an even more powerful way to understand the stock's true worth.

Union Pacific scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

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

The Discounted Cash Flow (DCF) model is a cornerstone of valuation analysis. It is used to estimate a company's intrinsic value by projecting future cash flows and discounting them back to their value today. This approach helps investors gauge whether the market price of the stock reflects its true long-term profit potential.

For Union Pacific, the analysis starts with its most recent Free Cash Flow, which is $6.24 billion. Looking forward, analyst estimates expect annual free cash flows to rise, projecting figures as high as $9.55 billion by 2029. Further into the future, additional projections extrapolate this growth, with double-digit billions anticipated in the early 2030s. These projections combine both analyst input for the coming years and longer-term growth assumptions provided by Simply Wall St.

According to the DCF model, the intrinsic value of Union Pacific comes to approximately $237.98 per share. This is about 5.3% above the current share price, suggesting the stock is priced very close to its fair value in today’s market.

Result: ABOUT RIGHT

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

Simply Wall St performs a valuation analysis on every stock in the world every day (check out Union Pacific's valuation analysis). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes.

Approach 2: Union Pacific Price vs Earnings (PE Ratio)

The price-to-earnings (PE) ratio is one of the most widely used valuation metrics for analyzing profitable companies like Union Pacific. It helps investors quickly compare how much they are paying for each dollar of earnings. This makes it a practical benchmark for established, consistently earning businesses.

The bar for what constitutes a fair PE ratio can shift depending on expected growth and perceived company risk. If a business is poised for rapid long-term growth, investors may be willing to pay a higher multiple. Conversely, if risks are mounting or growth looks slow, a lower PE ratio is typically justified.

Union Pacific currently trades at a PE ratio of 19.3x. This is higher than the peer average of 17.1x but sits well below the transportation industry average of 24.0x. To provide a more tailored benchmark, Simply Wall St calculates a Fair Ratio for each company. This measurement takes into account not just growth, but also profit margins, market cap, risks, and the company’s specific industry. For Union Pacific, the Fair Ratio is 19.2x.

This Fair Ratio offers a more precise view than simply comparing to peers or broader industry averages because it is customized to Union Pacific’s actual outlook and characteristics, rather than to a generic group.

With a current PE of 19.3x and a Fair Ratio of 19.2x, Union Pacific appears to be almost exactly fairly valued by this measure.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Union Pacific Narrative

Earlier, we mentioned there is an even better way to understand what a stock is truly worth: Narratives. Narratives are an easy-to-use tool on Simply Wall St's Community page that let you connect your view of the company’s story, such as efficiency upgrades or merger risks, to your own financial forecast and fair value estimate for Union Pacific.

Instead of relying only on traditional ratios, Narratives weave together your assumptions for things like future revenue, profit margins, and price multiples, turning them into a dynamic forecast alongside your reasoning. This makes your investment thesis transparent and accessible while automatically updating as new earnings or breaking news emerge.

With Narratives, you can quickly compare your own calculated fair value to today’s price to decide whether to buy, sell, or hold. For example, some investors might see Union Pacific’s expansion and efficiency upgrades driving a fair value of $294 per share, while others may focus on merger uncertainty or export headwinds, landing closer to $213 per share. This shows how different stories produce different conclusions. Try building your own Narrative to clarify your view and act before the market catches up.

Do you think there's more to the story for Union Pacific? Create your own Narrative to let the Community know!

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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