QS Research · Michael Burry's Scion Capital analyst template · 2006
UNION PACIFIC CORP (UNP)
As of 2026-11-08 · 11/15 boxes filled from SEC filings and market data
Conclusion: PASS
Conviction low · base case +8% · downside -10% · upside +15%
UNP is a high-quality, high-margin railroad, but at $290.16 the market already pays 22.6x TTM P/E, 15.4x EV/EBITDA and 7.66x EV/Sales for $7.62B TTM net income and $6.69B TTM FCF, so there is no deep-value discount. Using today's 22.6x P/E and the TTM base, a base case of +8% assumes the affirmed high-single-digit EPS growth is delivered; a -10% downside assumes fuel and merger friction keep earnings below trend; a +15% upside assumes the low-double-digit 3-year CAGR plus pricing above inflation. I do not rerate the multiple for the pending Norfolk Southern deal because the STB froze the review and the initial application was rejected as incomplete, so the catalyst is not yet bankable. The result is a pass: earnings power and balance sheet are solid, but the risk/reward does not meet the long rule (+30% base with downside no worse than -25%) or the short rule.
Key numbers
- Share price: $290.16
- Market cap: $172.43B
- Latest financial period: TTM to Sep 30, 2026
- Revenue (TTM): $26.36B
- EV / EBITDA (TTM): 15.4x
- P/E (TTM): 22.6x
- Price / book: 7.83x
The 15 boxes
- ✓ 1. Long-form business notes
UNP is one reportable operating segment: a 32,889-route-mile U.S. Class I railroad that generated $23.2 billion of freight revenue in 2025, split Bulk 33%, Industrial 37% and Premium 30% of freight revenue. Across the six fiscal years in the data (FY2020-FY2025), revenue rose from $19.53B to $24.51B, operating income from $7.83B to $9.85B and net income from $5.35B to $7.14B, with the only down year being FY2023 ($24.12B versus $24.88B in FY2022). Between the FY2020 10-K and the FY2025 10-K the language shifted from a G55+0/PSR transition story to a Safety-Service-Operational Excellence-to-Growth strategy promising an industry-leading operating ratio and ROIC, alongside a slightly larger network, more auto facilities, safety metrics redefined around derailments, and a pending Norfolk Southern acquisition referenced in the newest filing.
- ○ 2. Competitive advantage
The record supports a real but bounded advantage: a capital-heavy network that turned $24.51B of FY2025 revenue into $9.85B of operating income (about 40%, computed from S27), with operating margins in a 37.6%-42.8% band in every year FY2020-FY2025 and net income positive every year. The 10-K names Burlington Northern Santa Fe as the main rail competitor with parallel routes in many main corridors, and lists motor carriers, barges, ships and pipelines as rivals, while warning that shippers can substitute products, locations and carriers and that such competition 'may reduce our volumes or constrain prices'. Price and route decisions sit under STB and other regulation, FY2025 import tariffs hurt demand and raised input costs, and a pending Norfolk Southern merger (signed July 28, 2025) was dealt a procedural setback when the STB rejected the application as incomplete in January 2026. No source quantifies volumes, unit revenue, ROIC or competitor margins, so the moat claim rests on reported margins and returns only.
- ✓ 3. 10-Q takeaways
Q3 2026 was a record quarter: operating revenue $7,197M (+15%), freight revenue $6,813M (+15%) on 6% carload growth, fuel surcharges and pricing, with net income $2,076M (+16%) and diluted EPS $3.49 (+16%); the reported operating ratio improved 0.1 pt to 59.1% (adjusted 58.8%) despite fuel expense up 69%. Fuel was the dominant cost headwind (diesel $4.21/gal vs $2.56, unfavorably hitting the OR 140 bps per the release), while productivity, train length and workforce metrics improved even as both service performance indexes fell versus a high benchmark. Nine-month 2026 operating cash flow was $8,302M (+18%), free cash flow $2,362M, capital investment $2,834M, and share repurchases remain paused for the pending Norfolk Southern merger while the dividend rose to $1.42. Guidance in the same-quarter release is numeric on EPS growth, pricing and the $3.5B capital plan; the 10-Q's Item 1A adds nothing, pointing back to the 10-K risk factors.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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