Union Pacific Corporation LITING SHEN RYAN SEONG November 8th, 2016

Agenda Current Holding Company Introduction Business Overview SWOT Analysis Industry and Macroeconomic drivers Overview Revenue Growth Drivers Porter’s Five Forces Financial Performance Technical Ratio Analysis Valuation Relative DCF Recommendation

Current Holding In April 2013,purchased 100 @ $148.20 In June 2014, 2 for 1 split In April 2015,sold 100 @ $108 In November 2015,purchased 100 @ $84.71 Current market value: $ 18,150 Current price:90.75(11/7/2016) Gain: $ 2,269

Company Introduction Founded in 1862 and headquartered in Omaha, Nebraska Operates railroads and offers freight transportation services Has rail network Including 32,084 route miles Links the Pacific Coast and Gulf Coast ports with the Midwest and eastern United States gateways Serves the western two-thirds of the country Source: Union Pacific 2015 10-k (Pg. 5,6) URL: https://www.up.com/aboutup/usguide/index.htm

Business Overview Revenue Breakdown: In 2015, the company generated total revenues $21,813 Freight revenues totaled $20,397 Other revenues $1,416 Key Strategies: Aligns resources effectively to meet demand Keeps safety performance Uses robust capital program to ensure plenty of resources and network capacity Source: Union Pacific 2015 10-k (Pg. 3,6,25)

SWOT Analysis Strengths Weaknesses Strong cash position Diversified business mix A vast network Strong ROIC Heavily depending on certain key suppliers Fluctuating demand for our services and network capacity Fierce competition Opportunities Threats Future energy market opportunity New business development in evolving domestic and global markets Significant governmental and environmental regulation Future significant investments in technology Fluctuating fuel prices

Industry Overview Industry Life Cycle: Mature Phase Declines in 2015 and 2016 because of fluctuations in oil prices Fuel efficiency, demand for bulk freight, and low carbon footprint will increase demand for Rail Transportation Managing fuel efficiency will be a factor in continued success in the industry Investments to improve efficiency Investments into high-speed rail systems Source: IBISWorld

Revenue Growth Drivers Closely related to the world price of crude oil and represents the cost of diesel fuel in US dollar per gallon. Expected to rise over the next 5 years at an annualized rate of 11% Largely due to a low 2017 base Prices face downward pressure because of high production levels Rapid industrialization improved the demand for petroleum Built into model with regard to chemical revenue and fuel expenses Source: IBISWorld

Revenue Growth Drivers Total value of US trade by combining imports and exports of goods and services for the calendar year. Expected to rise over the next 5 years at an annualized rate of 4.42% The federal government aids support for trade Global consumption is increasing Particularly, Canada and Mexico are expected to improve economic growth Concern: Trade deficit with China Built into revenue model with regard to international business opportunities Source: IBISWorld

Revenue Growth Drivers Measures output from mining, manufacturing, electric, and gas industries. Growth in the IPI projected to remain moderate through the next 5 years (1.4%) Mining production declined The price of iron, aluminum, nickel and other commodities decline Measure of business activity and economic health Built into model to help forecast US economy as a whole Source: IBISWorld

. - Porter’s Five Forces Threat of New Entrants Substitutes Supplier Bargaining Power Buyer Rivalry High Moderate Low Forces Level Factors Threat of New Entrants Low High Capital Costs Economies of Scale Large networks Threat of Substitutes Moderate Land, ocean, and air Advantage to ship bulk freight Cost effective and timely Supplier Bargaining Power High Two main locomotive suppliers Highly regulated Own installation/maintenance Buyer Bargaining Power Concentration in the industry 85% among top 4 companies Rivalry Compete on travel time, fuel consumption, safety, and regulations Source: IBISWorld

Technical Analysis Source: bigcharts.com

Financial Performance

Financial Performance(cont’d) Dupont Analysis 2011 2012 2013 2014 2015 Tax Burden 62.5% 62.4% 62.3% 62.1% Interest Burden 92.0% 93.7% 94.7% 95.3% 95.1% Operating Margin 29.3% 32.2% 33.9% 36.5% 36.9% Asset Turnover 0.4x 0.5x Leverage 2.4x 2.3x 2.5x 2.6x ROE 18.1% 20.3% 21.2% 25.1% 23.5%

Comparable Companies Company Name Market Cap Business Description CSX Corp. (NasdaqGS:CSX) 28,577.5 M Provides rail-based transportation services in the United States and Canada. Norfolk Southern Corporation (NYSE:NSC) 27,150.6M Engages in the rail transportation of raw materials, intermediate products, and finished goods. Canadian National Railway Company (TSX:CNR) 48,226.2 M Engages in rail and related transportation business. The company transports cargo serving exporters, importers, retailers, farmers, and manufacturers. Kansas City Southern (NYSE:KSU) 9,441.1 M Provides freight rail transportation services and serves the chemical and petroleum, industrial and consumer products, agriculture and minerals, energy, intermodal, and automotive markets. Canadian Pacific Railway Limited (TSX:CP) 20,931.4 M Operates a transcontinental railway in Canada and the United States. It transports bulk commodities and intermodal traffic. Source: Capital IQ

Comparable Companies(cont’d) Source: Capital IQ

Comparable Companies(cont’d) TEV/Revenues LTM TEV/EBIT LTM LTM P/ E Forward P/E CSX Corp. (NasdaqGS:CSX) 3.5x 12.1x 17.0x 15.91x Norfolk Southern Corporation (NYSE:NSC) 3.7x 17.2x 16.01x Canadian National Railway Company (TSX:CNR) 6.3x 14.2x 18.6x 17.55x Kansas City Southern (NYSE:KSU) 5.2x 14.4x 19.4x 17.45x Canadian Pacific Railway Limited (TSX:CP) 5.9x 14.6x 19.0x 16.03x Union Pacific Corporation (NYSE:UNP) 4.3x 11.9x 17.7x 16.38x Summary Statistics TEV/ Revenues LTM TEV/EBIT LTM LTM P/ E Forward P/E High 6.3x 14.6x 19.4x 17.6x Low 3.5x 12.1x 17.0x 15.9x Mean 4.9x 13.5x 18.2x 16.6x Median 5.2x 14.2x 18.6x 16.0x Source: Capital IQ

Comparable Companies(cont’d) UNP Impllied Pirce   Multiples TEV/Revenues LTM TEV/EBIT LTM LTM P/E Forward P/E Average High $ 136.52 $ 111.77 $ 96.81 $ 94.42 $ 109.88 Low $ 68.63 $ 89.85 $ 84.83 $ 85.60 $ 82.23 Mean $ 103.06 $ 101.95 $ 91.02 $ 89.25 $ 96.32 Median $ 109.85 $ 108.27 $ 92.81 $ 86.24 $ 99.29 Implied Price :96.32 Source: Capital IQ

Revenue Projections

WACC Calculations

DCF Valuation

Recommendation HOLD $89.61 DCF Valuation $85.13 Comparable Implied Price $89.61 HOLD DCF Valuation $85.13 60% Comparable Valuation $96.32 40%