Though Union Pacific continues to navigate a tumultuous demand environment, particularly as it relates to the energy end market, the rails remain a key and indispensable part of North American infrastructure. Union Pacific offers a nice yield relative to peers, and its free cash flow generation remains solid thanks to brilliant execution on the operating line, as evidenced by an all-time best quarterly operating ratio. The only issue holding us back on Union Pacific remains its valuation. We’d have to see shares come in considerably for us to get interested. Our fair value estimate of Union Pacific stands at $142, while shares trade hands north of $170 these days.
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