While the S&P 500 is up 14.4% since June 2025, Union Pacific (currently trading at $240.75 per share) has lagged behind, posting a return of 7.2%. This was partly due to its softer quarterly results and might have investors contemplating their next move.
Is now the time to buy Union Pacific, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free for active Edge members.
Why Do We Think Union Pacific Will Underperform?
We're swiping left on Union Pacific for now. Here are three reasons there are better opportunities than UNP and a stock we'd rather own.
1. Weak Sales Volumes Indicate Waning Demand
Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful Rail Transportation company because there’s a ceiling to what customers will pay.
Over the last two years, Union Pacific’s units sold averaged 3.1% year-on-year growth. This performance was underwhelming and suggests it might have to lower prices or invest in product improvements to accelerate growth, factors that can hinder near-term profitability. 
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 2.4%. While 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 7.3 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 11.4%.
Final Judgment
We cheer for all companies making their customers lives easier, but in the case of Union Pacific, we’ll be cheering from the sidelines. With its shares trailing the market in recent months, the stock trades at 19.1× forward P/E (or $240.75 per share). This valuation is reasonable, but the company’s shaky fundamentals present too much downside risk. There are superior stocks to buy right now. Let us point you toward the most dominant software business in the world.
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