Union Pacific Corp. – Value Analysis (NYSE:UNP) : September 13, 2017

Capitalcube gives Union Pacific Corp. a score of 66.

Our analysis is based on comparing Union Pacific Corp. with the following peers – Kansas City Southern, CSX Corporation, Canadian National Railway Company, Norfolk Southern Corporation, Canadian Pacific Railway Limited and Genesee & Wyoming, Inc. Class A (KSU-US, CSX-US, CNI-US, NSC-US, CP-US and GWR-US).

Investment Outlook

Union Pacific Corp. has a fundamental score of 66 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • Taking peer performance into consideration, relative performance over the last month and last year is around the peer median.
  • It’s current Price/Book of 4.41 is about median in its peer group.
  • UNP-US‘s operating performance is relatively good compared to its peers. The market currently does not expect high earnings growth relative to its peers but seems to expect the company to maintain its relatively high rates of return.
  • UNP-US‘s relative asset efficiency and net profit margins are both around the median level.
  • Compared with its chosen peers, the company’s annual revenues and earnings change at a slower rate, implying a lack of strategic focus and/or lack of execution success.
  • UNP-US‘s return on assets currently and over the past five years suggest that its relatively high operating returns are sustainable.
  • The company’s relatively high gross margin suggests some differentiation with pricing advantages versus peers.
  • UNP-US‘s revenue growth in recent years and current P/E ratio are both around their respective peer medians suggesting that historical performance and long-term growth expectations for the company are largely in sync.
  • The company’s level of capital investment suggests it might be under-investing in a business with above median returns.
  • UNP-US has the financial and operating capacity to borrow quickly.

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Leverage & Liquidity

UNP-US has the financial and operating capacity to borrow quickly.

  • With debt at a relatively low 15.50% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 19.52%), and a well-cushioned interest coverage level of 10.89x, UNP-US can probably borrow quickly. We classify the company as Quick & Able in terms of its capacity to raise additional debt.
  • All 6 peers for the company have an outstanding debt balance.

UNP-US has maintained its Quick & Able profile from the recent year-end.

  • UNP-US‘s interest coverage is similar to last year’s low of 10.42x, which compares to the 2014 high of 15.60x.
  • Though its interest coverage has remained relatively stable at 10.89x compared to 2016, its peer median has increased to 6.70x from 6.05x during this period.
  • UNP-US‘s debt-EV is greater than (but within one standard deviation of) its five-year average debt-EV of 13.58%.
  • Though its debt-EV has remained relatively stable at 15.50% compared to 2016, its peer median has decreased to 19.52% from 23.76% during this period.
  • Relative to peers, debt-EV rose 4.47 percentage points.

Access the detailed analysis for Union Pacific Corp.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Kansas City Southern 18.8 0.87 8.63 34.96
CSX Corporation 19.52 1.57 6.7 27.54
Canadian National Railway Company 11.85 0.61 11.52 49.56
Norfolk Southern Corporation 22.77 0.83 5.71 29.5
Canadian Pacific Railway Limited 21.78 0.58 5.98 24.9
Genesee & Wyoming, Inc. Class A 35.15 1.26 3.97 19.06
Union Pacific Corporation 15.5 1.14 10.89 47.8
Peer Median 19.52 0.87 6.7 29.5
Best In Class 11.85 1.57 11.52 49.56

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Company Profile

Union Pacific Corp. engages in the provision of railroad and freight transportation services. Its principal operating company, Union Pacific Railroad Co., operates as a railroad franchise. The Railroad’s diversified business mix includes agricultural products, automotive, chemicals, coal, industrial products, and intermodal. The company was founded in 1969 and is headquartered in Omaha, NE.


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