Union Pacific Corporation $UNP ( ▲ 0.42% ) operates one of North America's largest railroad networks, moving $22.8 billion worth of freight across 32,880 route miles in the western United States. This is essentially a toll road business with trains—they own irreplaceable infrastructure and charge customers to haul everything from Wyoming coal to Toyota Camrys. With geographic monopoly power in many corridors, a 125-year dividend track record, and strong positioning for nearshoring trends (13% of revenue from Mexico trade), UNP offers steady cash flows and operational leverage. The bull case centers on growing North American trade, environmental regulations favoring rail over trucking, and continued margin expansion through technology investments. Bears worry about coal's 20% volume decline, economic cyclicality, and potential autonomous trucking disruption. At current levels, you're buying a mature infrastructure play that grows with the economy—more tortoise than hare, but with compelling long-term positioning in an oligopolistic industry.

In 2 years you will be working for AI

Or an AI will be working for you

Here's how you can future-proof yourself:

Join 1,000,000+ pros at companies like Google, Meta, and Amazon that are using AI to get ahead.

Sign up and start learning AI

Think of Union Pacific as America's ultimate moving company—except instead of helping you relocate your couch, they're moving entire trainloads of corn, cars, and containers across the western United States. With 32,880 route miles of track (that's enough to circle the Earth 1.3 times!), they operate one of the largest railroad networks in North America.

Union Pacific makes money the old-fashioned way: they charge customers to haul stuff from Point A to Point B. But unlike your local moving company, their "stuff" includes everything from Wyoming coal powering California's lights to Toyota Camrys heading to dealerships in Texas. They generated $22.8 billion in freight revenue in 2024 ↗️, proving that even in our digital age, someone still needs to move physical goods around.

Union Pacific organizes their business around three main commodity groups, each with its own personality:

Bulk (32% of revenue - $7.2 billion) 🌾 This is the "heavy lifting" division—literally. They move agricultural products like grain from America's heartland to export ports, fertilizer to farms, and coal from Wyoming's Powder River Basin to power plants. Think of this as the company's agricultural and energy backbone. It's steady, essential work, but coal volumes dropped 20% ↘️ in 2024 as natural gas continues eating coal's lunch in electricity generation.

Industrial (37% of revenue - $8.4 billion) 🏭 The most diverse segment, hauling everything from steel and chemicals to lumber and petroleum products. This is where Union Pacific shows its versatility—one day they're moving industrial chemicals for manufacturing, the next they're hauling lumber for new home construction. It's like being the Swiss Army knife of freight transportation.

Premium (31% of revenue - $7.2 billion) 🚗 The crown jewel segment, moving finished automobiles and intermodal containers. Union Pacific is the largest automotive carrier west of the Mississippi, operating 39 vehicle distribution centers. They also handle those ubiquitous shipping containers you see stacked at ports—both international cargo coming through West Coast ports and domestic containers competing with trucking.

Union Pacific obsesses over several key metrics that tell the story of their operational health:

Running a railroad isn't cheap. Union Pacific invested $3.4 billion in capital expenditures in 2024, mostly on track maintenance, locomotive upgrades, and technology improvements. They own 6,106 locomotives and 33,704 freight cars, plus all that track infrastructure. It's like maintaining a small country's worth of transportation assets.

Their workforce of 32,439 employees (average age 46.9, average tenure 16.2 years) represents a significant investment in human capital. About 84% are unionized, and the company works with 13 major rail unions under the Railway Labor Act—a framework designed to prevent transportation disruptions.

Union Pacific operates in what economists politely call a "highly concentrated industry" and everyone else calls an oligopoly. There are only seven Class I railroads in North America, and Union Pacific is one of the big dogs. Their main competitors include:

Here's where Union Pacific's position gets interesting: they have what amounts to geographic monopoly power in many corridors. You can't exactly build a competing transcontinental railroad in 2024—the regulatory hurdles, environmental reviews, and land acquisition costs would be astronomical. This creates natural barriers to entry that would make even the most ambitious competitor think twice.

Union Pacific is the only railroad serving all six major Mexico gateways, giving them unique access to growing cross-border trade. They connect Pacific Coast ports (crucial for Asian imports) with inland markets, and their network reaches 23 states in the western two-thirds of the country. Try replicating that network today—good luck getting the permits!

While Union Pacific dominates long-haul rail freight, they constantly compete with trucking for shorter routes. Trucks offer door-to-door service and flexibility that trains can't match. However, trains have a massive advantage in fuel efficiency—they can move one ton of freight about 500 miles on a single gallon of fuel, roughly 4x more efficient than trucks.

The company has responded by investing heavily in intermodal services, combining rail's long-haul efficiency with trucking's local flexibility. Think of it as the best of both worlds: your container travels by rail for 1,000 miles, then gets picked up by a truck for the final 50 miles to its destination.

2024 showcased Union Pacific's strategic advantages beautifully. When labor negotiations created uncertainty at East Coast and Canadian ports, freight shifted to West Coast ports where Union Pacific has strong connections. International intermodal volumes surged over 30% ↗️ in the second half of 2024, demonstrating how their network positioning provides value during supply chain disruptions.

The company also showed operational resilience, handling a 3% volume increase ↗️ while actually improving service metrics. That's like a restaurant serving more customers while reducing wait times—not easy to pull off.

Union Pacific's $24.2 billion in total operating revenue breaks down into several streams:

Freight Revenue ($22.8 billion - 94% of total) 🚂

Other Revenue ($1.4 billion - 6% of total) 📦

Here's a nugget that might surprise you: $3.0 billion (13% of total freight revenue) comes from shipments to and from Mexico ↗️. That's up 8% from 2023, driven by higher grain exports and finished vehicle shipments. With nearshoring trends and USMCA trade benefits, this could be a significant growth driver.

In 2024, Union Pacific moved 8.3 million carloads ↗️ (up 3%), but their average revenue per car was $2,737 ↘️ (down 2%). This reflects a classic railroad challenge: they grew volumes but with a less profitable mix of traffic. More international intermodal containers (lower revenue per car) and fewer coal shipments (higher revenue per car) shifted the math.

Fuel expense was $2.5 billion in 2024 ↘️, down from $2.9 billion in 2023 thanks to lower diesel prices. But here's the kicker: Union Pacific has fuel surcharge programs that generated $2.6 billion in revenue. The catch? There's about a two-month lag between fuel price changes and surcharge adjustments, creating timing impacts on earnings.

Union Pacific's $14.5 billion in operating expenses breaks down as:

Railroad business has natural rhythms. Agricultural shipments peak during harvest seasons, intermodal traffic surges before back-to-school and holiday shopping, and coal demand varies with weather (more heating/cooling = more electricity = more coal, though this is declining).

The company's operating ratio of 59.9% ↗️ (improved from 62.3%) shows they're getting more efficient at converting revenue into profit. In railroad land, every percentage point improvement in operating ratio is significant—it represents millions in additional profit.

Belief #1: North American Trade Will Keep Growing You need to believe that goods will continue moving between the U.S., Mexico, and Canada. With nearshoring trends, USMCA benefits, and Union Pacific's unique access to all six Mexico gateways, cross-border trade growth could be a major tailwind. Their $3.0 billion in Mexico-related revenue ↗️ (up 8%) suggests this is already happening.

Belief #2: Environmental Regulations Will Favor Rail Rail is 4x more fuel-efficient than trucking and reduces greenhouse gas emissions by up to 75%. As carbon pricing and environmental regulations tighten, rail becomes more attractive. Union Pacific's investments in fuel-efficient locomotives and technology position them well for this shift.

Belief #3: Operational Excellence Will Drive Margin Expansion Their 2.4 percentage point operating ratio improvement ↗️ shows management can execute. With continued technology investments (autonomous track inspection, predictive maintenance, AI-powered train building), they could squeeze more efficiency from their network.

Belief #4: Pricing Power Will Persist Geographic monopolies in many corridors provide pricing power. As long as customers need to move freight through Union Pacific's territory, they can maintain reasonable price increases over time.

Risk #1: Coal's Continued Decline Coal volumes dropped 20% ↘️ in 2024 and will likely keep falling as natural gas and renewables gain market share. Coal historically provided high-margin, long-haul revenue. Replacing this revenue with lower-margin traffic is challenging.

Risk #2: Economic Sensitivity Railroads are cyclical businesses tied to industrial production, construction, and trade. A recession would hit volumes hard across all segments. The company's diverse commodity mix helps, but doesn't eliminate this risk.

Risk #3: Autonomous Trucking Disruption While still years away, autonomous trucks could eventually reduce rail's cost advantage for certain routes. If trucking becomes significantly cheaper and more efficient, it could pressure rail market share.

Risk #4: Infrastructure Aging Union Pacific's network includes assets built decades ago. While they invest $3.4 billion annually in capital expenditures, aging infrastructure could require even higher spending to maintain service levels.

Risk #5: Labor Relations With 84% unionized workforce and negotiations every five years under the Railway Labor Act, labor disputes could disrupt operations. The 2022 near-strike across the industry showed how quickly labor issues can escalate.

Union Pacific is fundamentally a toll road business with trains. They own irreplaceable infrastructure in strategic corridors, generate consistent cash flows, and have returned capital to shareholders for over a century. The business model is simple, the competitive position is strong, and the long-term trends (nearshoring, environmental focus) seem favorable.

However, this isn't a high-growth tech stock. It's a mature, capital-intensive business that grows roughly in line with the economy. The excitement comes from operational improvements, market share gains, and the potential for rail to benefit from supply chain reshoring.

At current levels, you're buying a piece of American infrastructure with a 125-year dividend track record, reasonable valuation metrics, and management that's proven they can improve operations. Just don't expect it to double overnight—this is more tortoise than hare, but sometimes slow and steady wins the race. 🐢

AI-written, human-approved

Disclaimer: This guide is for informational purposes only and does not constitute financial advice, investment recommendations, or an offer or solicitation to buy or sell any securities. The information contained in this report has been obtained from sources believed to be reliable, but StrataFinance does not guarantee its accuracy, completeness, or timeliness.