Union Pacific Corporation

Comprehensive Analysis of Union Pacific (UNP)

Technical Analysis UNP shows impressive bullish momentum, significantly outperforming the market with notable gains of around 18.6% over recent periods. Trading near its 52-week high suggests strong investor confidence, although it is entering overbought territory. The modest beta indicates volatility in line with the broader market, supported by a manageable maximum drawdown.

Fundamental Strength Union Pacific demonstrates robust profitability with operating margins near 39% and disciplined cost control, even amid slight revenue fluctuation. Its moderate leverage and adequate interest coverage reflect solid financial health, though the current ratio signals minor liquidity constraints. Operational efficiency is solid, highlighted by a quick cash conversion cycle and respectable returns on equity.

Valuation Concerns The stock's valuation appears stretched, with a forward P/E of 18.5 but a very high PEG ratio of 5.6, indicating that growth expectations may not justify the premium price. Without direct peer data, metrics like the elevated price-to-book and EV/EBITDA ratios suggest caution, as UNP trades at levels that demand strong future performance.

Risk Factors UNP carries typical market-level volatility and has experienced drawdowns over 16% in the past year, posing risks for short-term traders. While low short interest indicates market optimism, economic sensitivity and regulatory pressures inherent to the railroad sector remain pertinent concerns.

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Buy Recommendation Union Pacific is a high-quality operator with strong fundamentals and momentum, making it appealing for long-term investors focused on stable, profitable companies. However, its rich valuation and technical overbought condition suggest limited near-term upside and elevated risk. Investors may consider waiting for a pullback to enter, ensuring a better margin of safety while still capturing UNP’s operational strengths.

*Note: This is not investment advice, for reference only.*

RockFlow Model Forecast: Three Scenarios for 2026

Based on the provided analysis, Union Pacific's 12-month outlook balances strong operational excellence against a premium valuation.

Key Catalysts & Outlook: The primary positive catalysts are UNP's robust operational momentum, superior profitability with ~39% operating margins, and demonstrated market outperformance. These strengths support a moderately bullish outlook for long-term investors, though near-term price appreciation may be limited.

Potential Risks: The most significant risk is the stock's stretched valuation, as signaled by the high PEG ratio of 5.6 and its position in overbought territory near 52-week highs. This makes the stock vulnerable to a pullback, especially if broader economic conditions soften or quarterly results fail to meet high expectations.

Price Target: While a specific analyst target was not provided, the analysis suggests the current price offers limited near-term upside. A more attractive entry point would likely be below the current level. The 12-month performance will heavily depend on whether the company's earnings growth can accelerate to justify its premium valuation.

Wall Street Consensus

Most Wall Street analysts are optimistic about Union Pacific Corporation's 12-month outlook, with consensus target around $262.97, indicating expected upside potential.

Overall, UNP has investment potential but also faces challenges. Here are key factors to weigh before investing.

UNP has demonstrated exceptionally strong price performance, materially outperforming the broader market over the recent quarter. The stock is currently trading near its 52-week high, reflecting sustained upward momentum.

The stock has posted remarkable gains of approximately 18.6% over both the one and three-month periods, indicating consistent and powerful bullish momentum. This performance substantially outpaces the general market, as evidenced by its significant positive relative strength of nearly 17% over three months, suggesting strong investor confidence and positive catalysts specific to the company.

UNP is presently trading at $262.97, which is within 1% of its 52-week high of $265.64, positioning it in technically overbought territory. Despite a maximum drawdown of -16.46% over the past year, the stock's beta near 1.0 confirms its volatility has been roughly in line with the overall market during this robust advance.

Revenue & Profitability Union Pacific demonstrated solid operational performance with healthy profit margins. The company maintained robust operating margins around 39% in Q4 2025, with net profit margins exceeding 30%. While revenue declined marginally from Q3 to Q4, profitability metrics remained strong, indicating effective cost management despite slight top-line pressure.

Financial Health UNP maintains moderate leverage with a debt-to-equity ratio of 1.72 and a debt ratio of 0.46. The interest coverage ratio of 7.3x demonstrates sufficient earnings capacity to service debt obligations. Operating cash flow generation appears adequate, though the current ratio below 1 suggests some short-term liquidity constraints.

Operational Efficiency The company delivers respectable returns with ROE at 10.0% and ROCE at 3.7%. Asset turnover remains modest at 0.09, reflecting the capital-intensive nature of railroad operations. The efficient cash conversion cycle of 27 days indicates effective working capital management and operational execution.

Valuation Level Union Pacific's forward P/E of 18.5 is slightly below its TTM P/E of 22.0, suggesting some earnings growth expectation. However, its extremely high PEG ratio of 5.6 indicates the stock is significantly overvalued when factoring in its growth prospects, as a PEG well above 1.0 signals a premium valuation unsupported by growth.

Peer Comparison A direct peer comparison cannot be performed as industry average data is not available. The analysis is therefore limited to UNP's standalone valuation metrics. The stock's elevated PB ratio of 8.52 and high EV/EBITDA of nearly 50 would require industry context for a complete comparative assessment.

Volatility Risk: UNP's beta of 0.987 implies its price tends to move nearly in line with the broader market, indicating a moderate level of systematic volatility risk. The 1-year maximum drawdown of -16.46% demonstrates that the stock has experienced significant peak-to-trough declines, which is a considerable risk for investors seeking capital preservation.

Other Risks: The absence of meaningful short interest suggests that the market does not currently perceive a high probability of a near-term price decline from negative sentiment. However, as a large-cap railroad, the stock is still exposed to sector-specific risks such as economic cyclicality, freight volume fluctuations, and regulatory changes.