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Union Pacific Corp UNP

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Morningstar’s Analysis

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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Union Pacific's Q2 Carloads Post Solid Recovery; Margin Progress Excellent and Guidance Favorable

Matthew Young, CFA Equity Analyst

Analyst Note

| Matthew Young, CFA |

Wide-moat Class I railroad Union Pacific's second-quarter revenue jumped 30% year over year, driven by favorable comparisons (initial pandemic headwinds in the year-ago quarter), solid demand recovery across most carload groups, and yield improvement. Total carload volume expanded 22% versus a 1% fall last quarter, which had weather headwinds. Average revenue per carload was up 6% on solid contract rate gains and (likely) more favorable mix (higher grain activity, for example). Core pricing is benefiting from constrained capacity across most transportation modes, which is lifting railroads’ pricing power nicely. Management now expects full-year volume growth near 7% (6% previously), above our previous 6% forecast. It still expects "pricing gains in excess of inflation dollars."

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Company Profile

Business Description

Omaha, Nebraska-based Union Pacific is the largest public railroad in North America. Operating on more than 30,000 miles of track in the western two thirds of the U.S., UP generated roughly $20 billion of revenue in 2020 by hauling coal, industrial products, intermodal containers, agriculture goods, chemicals, and automotive goods. UP owns about one fourth of Mexican railroad Ferromex and derives about 10% of its revenue hauling freight to and from Mexico.

Contact
1400 Douglas Street
Omaha, NE, 68179
T +1 402 544-5000
Sector Industrials
Industry Railroads
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Cyclical
Employees 29,755

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