Since September 2025, Union Pacific has been in a holding pattern, posting a small return of 3.8% while floating around $240.85.
Is there a buying opportunity in Union Pacific, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Do We Think Union Pacific Will Underperform?
We're swiping left on Union Pacific for now. Here are three reasons you should be careful with UNP and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
Examining a company’s long-term performance can provide clues about its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Regrettably, Union Pacific’s sales grew at a tepid 4.6% compounded annual growth rate over the last five years. This fell short of our benchmark for the industrials sector.
2. Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Union Pacific’s revenue to rise by 3.4%. Although this projection implies its newer products and services will spur better top-line performance, it is still below average for the sector.
3. Free Cash Flow Margin Dropping
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
As you can see below, Union Pacific’s margin dropped by 6.8 percentage points over the last five years. If its declines continue, it could signal increasing investment needs and capital intensity. Union Pacific’s free cash flow margin for the trailing 12 months was 9.4%.
Final Judgment
We see the value of companies helping their customers, but in the case of Union Pacific, we’re out. That said, the stock currently trades at 19.1× forward P/E (or $240.85 per share). At this valuation, there’s a lot of good news priced in - we think there are better stocks to buy right now. Let us point you toward one of our all-time favorite software stocks.
Stocks We Would Buy Instead of Union Pacific
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