The document provides an analysis of Union Pacific Corporation by the Student Management Investment Fund. It includes economic data, an industry outlook, company information on UNP, drivers of the company, a company analysis, and a valuation analysis. The summary recommends buying UNP as it has a simple business model, favorable long-term prospects, is operated by experienced management, and is available at an attractive price below the $98 target price, offering 26.4% upside.

1. Student Management Investment Fund
Industrials Sector
Kendrick Bernal – Sector Manager
Scott Nunez – Associate Manager
Eduardo Madrid - Analyst
Mauricio Loschi - Analyst
Carlos Telleria - Analyst
Frank Brown – Analyst

2. I. Economic Data
II. Industry Outlook
III. Company Information
IV. Company Drivers
V. Company Analysis
VI. Valuation Analysis
VII. Summary
Table of Contents

3. Economic Data
Economic Data
GDP 3rd Quarter 2.2%
Inflation Rate 0.2%
Unemployment Rate 5.0%
Corp Credit A 10yr Bond 147bps
 Commodity prices have been falling due to weak
economic growth and demand in developed nations

4. Industry Outlook

5. Freight Outlook
12%
20%
29%
39%
How Freight Moves-
Percent Mile-Ton
Water Pipeline Truck Rail
18%
15%
14%
11%
9%
7%
7%
7%
6%6%
Top 10 Commodities by Value
Machinery Electronics
Motorized Vehicles Mixed Freight
Pharmaceuticals Miscellaneous
Textiles/Leather Gasoline
Plastics/Rubber Base Metal

6. Company Info.Company
Information

7. Market Data
52-week high 124.52
52-week low 74.78
Previous close 77.55
Market Cap 66.89B
Outstanding Shares 854.1M
Beta .93
EPS (ttm) 5.79
Trailing P/E Ratio 13.53
Forward P/E 12.58
Catalysts
Simple Business Model
Favorable Long-term prospects
Operated by Honest and Experienced
Management
Available at a very attractive price
Eagle Materials
[Ticker: UNP]
Union Pacific Corporation, through its subsidiary, Union Pacific Railroad Company, operates railroads in the
United States. The company offers freight transportation services for agricultural products, including grains,
commodities produced from grains, and food and beverage products; automotive products, such as
finished vehicles and automotive parts; and chemicals consisting of industrial chemicals, plastics, crude oil,
liquid petroleum gases, fertilizers, soda ash, sodium products, and phosphorus rock and sulfur products. It
also provides transportation services for coal and petroleum coke; industrial products comprising
construction products, minerals, consumer goods, metals, lumber, paper, and other miscellaneous products;
and intermodal import and export containers and trailers.
Union Pacific
Stock Performance

8. Company Overview
Key Highlights
 Steady growth
 Stable through downturns
 Well Diversified
$0
$2,000
$4,000
$6,000
$8,000
$10,000
2008 2009 2010 2011 2012 2013 2014 2015E 2016E
Operating Income
17%
9%
16%
18%
20%
20%
Freight Revenue
Mix
Agricultural Products
Automotive
Chemicals
Coal
Industrial Products
Intermodal
$23 Billion
51%
49%
West Coast Market Share by Revenue
UNP
BNSF

9. Company Drivers

10. Railroad Network
• Approximately 32,000 miles of rail
• Connections to all 6 major U.S.-Mexico gateways
• Connections to Canadian gateways
• Serves all major West Coast ports

11. S.W.O.T. Analysis
Strengths
• Only railroad serving all major Mexico
gateways
• Connection with Canada’s rail systems
• High barrier to entry
• Experienced executives and board
members
Opportunities
• West coast ports resuming normal
operations
• 120 million common equity share
repurchase program.
Weaknesses
• Government regulation
• Reliability in capital markets
• Environmental laws and regulations
Threats
• Demand could exceed network
capacity
• Risk of liabilities from operations
• Competition

12. Risks
 Transportation of hazardous materials
 Strikes or work stoppages
 Increase in fuel prices
 Reliability on technology
 Insurance coverage
 Agreements with labor unions
 Fuel surcharges
 Improvements to and acquisition of new technologies
Key Risks
Risk Mitigation

13. Executive Directors
Name(age) Since/Started Position
Lance M. Fritz (52) 2015/2000 Chairman, President, CEO
Robert M. Knight (57) 2004/1980 CFO
Diane K. Duren (55) 2012/1985 Executive Vice President, Corporate Secretary
Gayla L. Thal (58) 2010/2004 Senior Vice President, Law and General Counsel
Eric L. Butler (54) 2012/1986 Executive Vice President of Marketing and sales
Cameron Scott 2014/1990 Executive Vice Presidents-Operations

14. Company Analysis

15. Liability Distribution
1-Year Default FY 2013 FY 2014 FY 2015
Probability 0.0216% 0.0095% 0.0357%
Risk IG5 IG4 IG6
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
2016 2017 2018 2019 2020 Thereafter
Debt Maturity Distribution
Debt Maturity Normal Acquistion
2%
86%
9%
3%
Debt Distribution
Term Loans
Senior Bonds and Notes
Capital Leases
General/Other Borrowings
$1.7B in undrawn credit facilities

16. Growth Outlook
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
2011 2012 2013 2014 2015E 2016E
Net Income Margin
$-
$5,000.00
$10,000.00
$15,000.00
$20,000.00
$25,000.00
$30,000.00
2011 2012 2013 2014 2015E 2016E
Freight Revenues (in millions of USD)
$-
$2.00
$4.00
$6.00
$8.00
$10.00
2011 2012 2013 2014 2015E 2016E
EPS (Adj.)
Operating Goals
Improve network operations
Renew track infrastructure and fleet
Improve strong safety performance
Achieve solid core pricing gains

17. 2010 2011 2012 2013 2014 LTM 2015
Profitability
Gross Margin 42.4% 41.5% 44.4% 45.9% 48.3% 50.1%
EBITDA Margin 38.4% 37.5% 40.6% 42.0% 44.4% 46.1%
Net Income Margin 16.4% 16.8% 18.8% 20.0% 21.6% 22.3%
Operating Ratio 70.6% 70.7% 67.8% 66.1% 63.5% 63.1%
Management Effectiveness
Return on Assets 7.4% 8.1% 9.1% 9.6% 10.7% 10.0%
Return on Equity 16.1% 18.1% 20.5% 21.4% 24.4% 24.1%
Return on Capital 11.7% 13.1% 15.0% 15.6% 17.2% 15.9%
Balance Sheet Strength
Debt to Equity 52.0% 47.9% 45.3% 45.1% 54.2% 64.7%
Current Ratio 1.2x 1.1x 1.2x 1.1x 1.2x 1.1x
Fundamental Analysis
 Increasing Margins
 Increasing Returns
 Consistent Balance
Sheet Strength

18. Valuation Analysis

19. Comparable Analysis
Narrow Competitors
CSX
NSC
CP
CNR
 Greater Returns
 Greater Financial Strength
 Greater Margins
Management
Effectiveness
UNP Narrow Competitor Broad Competitor
ROA 10.11% 7.75% 6.25%
ROE 24.43% 21.35% 18.85%
ROIC 11.65% 9.45% 7.09%
Financial Strength UNP Narrow Competitors Broad Competitor
EBITDA-CAPEX/
Interest Expense
11.93 5.60% n/a
Net Debt/ EBITDA 0.93 1.75 1.13
Dividend Growth- 1yr 29.05% 7.97% -8.08%
Profitability Ratios UNP Narrow Competitors Broad Competitor
EBITDA Margin 44.43% 41.75% 18.90%
Net Income Margin 21.59% 20.20% 5.39%
Revenue Growth 9.22% 7.85% 18.04%

20. Valuation
Buy
Current Price $77.55
Target Price $98.00
% Upside 26.4%
$25.00 $35.00 $45.00 $55.00 $65.00 $75.00 $85.00 $95.00 $105.00 $115.00 $125.00
Average
ANR
DCF
P/TBV
EV/FCF
EV/EBIT
Min to Median
Median to Max
Valuation Metrics UNP CSX NSC CP CNR
P/FCF 22.92 35.55 158.91 32.65 31.28
P/E 14.86 13.33 15.80 18.52 17.83
P/TBV 4.97 3.28 2.72 7.41 4.82
EV/EBITDA 7.91 8.04 7.56
DCF Assumptions
Growth Rate 3.13%
WACC 6.50%

21. Undervalued
6
8
10
12
14
16
14Q4 14Q1 15Q2 15Q3 Current
EV/EBITDA
UNP NSC CSX CP CNR
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
14Q4 14Q1 15Q2 15Q3 15Q4est
Dividend Yield
UNP NSC CSX CP CNR
• Cheap Stock
• Strong Stock
• Increasing Dividend
• Experienced management- 120million
share repurchase program
• Largest North American railroad by
market cap

22. Summary

23. Summary
 Simple Business Model
 Favorable Long-term prospects
 Operated by Honest and Experienced Management
 Available at a very attractive price
Buy
Current Price $77.55
Target Price $98.00
% Upside 26.4%
Catalyst
Consensus Rating: 4.45
Buys: 75%
Holds: 21%
Sells: 3%
12M Tgt Px 26/31 104.12
Last Price 78.31
Return Potential 33%
LTM Return -32.5%