Investment Thesis
Union Pacific demonstrates exceptional operational efficiency with 39.5% operating margins and 27.4% net margins, generating robust free cash flow of $1.5B annually. However, elevated leverage (1.53x Debt/Equity) with marginal interest coverage (2.6x) and sub-1.0 liquidity ratios create financial vulnerability, requiring close monitoring of debt service capacity amid modest 1.1% revenue growth.
Strengths
- Outstanding operating and net margins (39.5% and 27.4%) demonstrate pricing power and operational discipline
- Strong free cash flow generation ($1.5B, 24.2% FCF margin) covers debt service with adequate cushion
- EPS growing faster than revenue (+8.0% vs +1.1%) indicates margin expansion and cost management excellence
Risks
- High financial leverage (1.53x Debt/Equity) with marginal interest coverage (2.6x) creates vulnerability to economic downturns or rate increases
- Weak liquidity position with current ratio of 0.92x and minimal cash ($735M) versus $29.8B debt limits financial flexibility
- Anemic revenue growth (+1.1% YoY) combined with mature industry dynamics limits upside potential
Key Metrics to Watch
- Interest coverage ratio trend - deterioration below 2.5x would indicate debt stress
- Free cash flow sustainability - must remain positive to service debt obligations
- Operating margin trends - any compression would pressure returns given high leverage
Financial Metrics
Revenue
6.2B
Net Income
1.7B
EPS (Diluted)
$2.87
Free Cash Flow
1.5B
Total Assets
69.6B
Cash
735.0M
Profitability Ratios
Gross Margin
N/A
Operating Margin
39.5%
Net Margin
27.4%
ROE
8.8%
ROA
2.4%
FCF Margin
24.2%
Balance Sheet & Liquidity
Current Ratio
0.92x
Quick Ratio
0.92x
Debt/Equity
1.53x
Debt/Assets
72.1%
Interest Coverage
2.57x
Long-term Debt
29.8B
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-04-29T15:24:01.395450 |
Data as of: 2026-03-31 |
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