An independent two-stage DCF analysis by a frontier AI model.
"> Railroads are mature. Volume growth is historically tied to industrial production and often sluggish. Growth primarily comes from pricing power (raising rates) and operating ratio improvements (efficiency). 5% is a balanced expectation for a massive, capital-intensive incumbent.
"> 10Y Treasury: 4.18%. We use 8% because UNP has a virtually unassailable economic moat (you can't build a new transcontinental railroad), reliable cash flows, and lower cyclicality than many industrials. A lower discount rate is justified for lower fundamental risk.
"> Long-term nominal GDP growth is ~3%, with target inflation at 2%. Railroads move the physical economy. 2.5% assumes UNP essentially tracks long-term inflation and modest economic expansion forever.
Intrinsic value per share under varying discount rate and terminal growth rate assumptions.
| WACC ↓ / Terminal → | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 1.5% | $29.94 | $24.50 | $20.73 | $17.97 | $15.85 |
| 2.0% | $33.69 | $26.95 | $22.46 | $19.25 | $16.84 |
| 2.5% | $38.50 | $29.94 | $24.50 | $20.73 | $17.97 |
| 3.0% | $44.92 | $33.69 | $26.95 | $22.46 | $19.25 |
| 3.5% | $53.90 | $38.50 | $29.94 | $24.50 | $20.73 |
■ Undervalued vs current price ■ Overvalued vs current price
Union Pacific exhibits a strong economic moat driven by its irreplaceable rail network and a near-duopoly position in the Western US. While top-line growth is constrained by mature end-markets and a slight revenue contraction (-0.6%), its exceptional operating margins (40.9%) and robust free cash flow generation support a 'Strong' overall verdict. The company remains highly profitable with significant pricing power over captive shippers.
UNP demonstrates solid competitive momentum through significant pricing power, despite facing headwinds in aggregate revenue growth due to mixed freight volumes.
The company's moat is extraordinarily durable, founded on an irreplaceable physical network and high barriers to entry that protect its core business from new entrants.
Market sentiment views UNP as a stable cash generator rather than a growth story, with management consistently utilizing strong cash flows for shareholder returns.
Disclaimer: The numbers presented on this page are for educational and entertainment purposes only. They are the result of a deterministic mathematical model fed with assumptions generated by an Artificial Intelligence (Gemini 3.1). This does not constitute investment advice. Always conduct your own due diligence before investing in the stock market.