# Union Pacific Corporation (UNP) — Financial Analysis

**Exchange:** NYSE  
**Coverage as of:** 2026-Q2  
**Updated:** 2026-05-29  
**Tier:** Free primer (step 2 of 19)  
**Sibling pages:** /stocks/UNP/thesis · /stocks/UNP/memo

## Financial Snapshot

---
source: coverage-next-full
ticker: UNP
step: "04"
title: Financial Snapshot
created: 2026-05-29
---

### Step 04 — Financial Snapshot

#### Three-Year P&L Summary

| Metric | FY2021 | FY2022 | FY2023 |
|--------|--------|--------|--------|
| Operating Revenue | $21.8B | $24.9B | $23.9B |
| Revenue Growth YoY | +12% | +14% | -4% |
| Operating Expenses | $13.2B | $14.8B | $14.3B |
| Operating Income | $8.6B | $10.1B | $9.6B |
| Operating Ratio (OR) | 60.5% | 59.5% | 59.8% |
| Net Income | $6.5B | $7.0B | $6.4B |
| Diluted EPS | $9.95 | $11.17 | $10.61 |
| EPS Growth YoY | +33% | +12% | -5% |

*OR = Operating Expenses / Operating Revenue. Lower is better. OR is the primary profitability metric for railroads.*

#### Operating Expense Breakdown (FY2023)

| Expense Category | FY2023 Amount | % of Revenue |
|-----------------|--------------|-------------|
| Compensation & Benefits | ~$4.0B | ~16.8% |
| Fuel | ~$2.4B | ~10.0% |
| Purchased Services & Materials | ~$2.5B | ~10.5% |
| Depreciation & Amortization | ~$2.3B | ~9.6% |
| Equipment & Other Rents | ~$0.7B | ~2.9% |
| Other Operating Expenses | ~$2.4B | ~10.0% |
| **Total Operating Expenses** | **~$14.3B** | **~59.8%** |

**Compensation** is the largest expense category, comprising ~27-28% of total operating expenses. The railroad industry secured multi-year labor agreements with all 12 craft unions in 2022-2023 after a prolonged negotiation that nearly resulted in a national rail strike. These agreements include wage increases of ~24% over 5 years plus improvements in paid sick leave — a permanent cost step-up that pressures OR.

**Fuel** is the second-largest expense (~17% of operating expenses). Diesel is passed through via fuel surcharges in customer contracts, so the net impact on operating income from fuel price changes is muted (surcharges typically capture 75-85% of incremental fuel costs). Diesel consumed: ~1.1-1.2 billion gallons annually.

**Depreciation** reflects the massive capital base of rail infrastructure. UP's net PP&E is ~$45-50B. The depreciation rate (~4.5-5% of gross PP&E) reflects the long useful lives of track and roadway.

#### Key Margin Analysis

| Margin Metric | FY2021 | FY2022 | FY2023 |
|--------------|--------|--------|--------|
| Gross Margin (Revenue - OpEx) | 39.5% | 40.5% | 40.2% |
| EBIT Margin | 39.5% | 40.5% | 40.2% |
| EBITDA Margin | ~50% | ~50% | ~49.5% |
| Net Income Margin | 29.8% | 28.1% | 26.8% |
| FCF Margin (FCF/Revenue) | ~26% | ~24% | ~24% |

**Operating Ratio Context**: Union Pacific's OR of ~59.8% in FY2023 places it as the best-in-class western US railroad. BNSF (private) operates at a slightly higher OR (~60-62%) historically. Eastern railroads CSX and NSC have been in the 55-60% range after their own PSR implementations. OR improvement from 63-65% (pre-PSR, 2015-2017) to the current ~59-60% range has been the defining financial story.

#### Free Cash Flow Generation

| FCF Component | FY2021 | FY2022 | FY2023 |
|--------------|--------|--------|--------|
| Operating Cash Flow | ~$9.0B | ~$10.5B | ~$9.5B |
| Capital Expenditures | ~$(3.4B) | ~$(3.6B) | ~$(3.7B) |
| Free Cash Flow | ~$5.6B | ~$6.9B | ~$5.8B |
| FCF Yield (on ~$140B mkt cap) | — | — | ~4.1% |

**FCF characteristics**: Union Pacific generates remarkably consistent FCF. Capital expenditures (~$3.5-3.7B annually) are required to maintain the network, roughly 14-16% of revenue. The railroad is a capital-intensive business, but the returns on those investments (ROIC ~15-17%) substantially exceed the cost of capital (~7-8% WACC), creating significant economic value.

**CapEx decomposition (approximate):**
- Maintenance of way (track, bridges, roadway): ~$2.0B
- Locomotive/equipment: ~$0.8B
- Technology, facilities, other: ~$0.9B

#### Income Statement Key Ratios

| Metric | FY2023 | Context |
|--------|--------|---------|
| Revenue per Employee | ~$400K | High due to capital intensity, PSR headcount reductions |
| Operating Income per Employee | ~$160K | Best-in-class for capital-intensive industrial |
| D&A / Revenue | ~9.6% | Reflects $45-50B net PP&E base |
| Interest Expense | ~$1.4B | Reflects ~$30B+ gross debt |
| Tax Rate (effective) | ~22-23% | Standard US corporate rate |

#### Earnings Quality Assessment

**High earnings quality. Key indicators:**
1. **FCF / Net Income ratio**: Consistently >90%, indicating earnings are backed by cash. The primary gap is non-cash items (stock comp, deferred taxes).
2. **Revenue recognition**: Straightforward point-in-time freight revenue recognition; no complex revenue arrangements.
3. **Non-recurring items**: Occasionally include gains on real estate sales (UP owns significant trackside real estate) and restructuring charges. These are typically small (<2% of operating income).
4. **Pension accounting**: UP has a defined benefit pension plan (~$5-6B obligation). The plan has been well-managed and is approximately funded, with no material underfunding risk.

#### Balance Sheet Summary (Year-End 2023)

| Item | Amount |
|------|--------|
| Cash & Equivalents | ~$1.0-1.5B |
| Total Assets | ~$65B |
| Gross PP&E | ~$60-62B |
| Net PP&E | ~$45B |
| Total Debt (gross) | ~$32B |
| Net Debt | ~$30-31B |
| Shareholders' Equity | ~$8-10B |
| Net Debt / EBITDA | ~2.5-2.7x |

**Note on equity**: Shareholders' equity appears low relative to the asset base due to the massive buyback program over the past decade. Union Pacific has returned over $50 billion to shareholders in buybacks since 2007, at times borrowing to fund them. This financial engineering is a key part of the UP investment thesis — high financial leverage on a stable, regulated-return asset base amplifies ROE without degrading the business fundamentals.

#### Recent Trend Analysis

The FY2023 revenue decline from FY2022's peak reflects:
1. Lower fuel surcharges (diesel fell from peak 2022 levels)
2. Intermodal volume softness (truck market stayed loose longer than expected)
3. Coal volume decline continuing
4. Industrial volume modestly softer on destocking

The underlying "core" story (pricing + efficiency) remained intact. The FY2023 decline is a cyclical headwind, not a structural deterioration. Under new CEO Jim Vena, the focus has shifted back to operational execution and OR improvement — which had stalled under his predecessor — with the stated ambition of reaching a sub-57% OR over the medium term.

## Deeper Financial Analysis

The fundamental tier ($1.00) adds 8 dimensions not included here:

- Revenue Breakdown — segment revenue, geographic mix, product-line margins
- Financial Trends — QoQ momentum, leading indicators, inflection points
- Balance Sheet — debt structure, dilution risk, working capital dynamics
- Capital Allocation — ROIC, buyback cadence, reinvestment efficiency
- Earnings Analysis — beats/misses, guidance vs actuals, transcript highlights
- Competitive Positioning — market share, pricing power, peer benchmarks
- Industry Context — TAM, sector tailwinds/headwinds, regulatory backdrop

**API endpoint:** GET /api/v1/research/UNP/fundamental

## Navigation

- Overview: /stocks/UNP
- Financials (this page): /stocks/UNP/financials
- Thesis: /stocks/UNP/thesis
- Investment Memo: /stocks/UNP/memo
- Coverage universe: /stocks