We've been asking ourselves recently if the market has placed a fair valuation on Union Pacific. Let's dive into some of the fundamental values of this large-cap Industrials company to determine if there might be an opportunity here for value-minded investors.
Union Pacific's Valuation Is in Line With Its Sector Averages:
Union Pacific Corporation, through its subsidiary, Union Pacific Railroad Company, operates in the railroad business in the United States. The company belongs to the Industrials sector, which has an average price to earnings (P/E) ratio of 20.49 and an average price to book (P/B) ratio of 3.78. In contrast, Union Pacific has a trailing 12 month P/E ratio of 21.2 and a P/B ratio of 9.63.
Union Pacific's PEG ratio is 4.16, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
EPS Trend Sustained Primarily by Reducing the Number of Shares Outstanding:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $22,832 | $21,708 | $19,533 | $21,804 | $24,875 | $24,140 |
| Gross Margins | 37% | 39% | 40% | 43% | 40% | 38% |
| Operating Margins | 37% | 39% | 40% | 43% | 40% | 38% |
| Net Margins | 26% | 27% | 27% | 30% | 28% | 26% |
| Net Income (MM) | $5,966 | $5,919 | $5,349 | $6,523 | $6,998 | $6,365 |
| Net Interest Expense (MM) | $870 | $1,050 | $1,141 | $1,157 | $1,271 | $1,342 |
| Depreciation & Amort. (MM) | $2,191 | $2,216 | $2,210 | $2,208 | $2,246 | $2,298 |
| Earnings Per Share | $7.91 | $8.38 | $7.88 | $9.95 | $11.21 | $10.41 |
| Diluted Shares (MM) | 754 | 706 | 679 | 655 | 624 | 573 |
