1. Kevin Farshchi Zichao Wang Xiaoya Xiong Presented December 9, 2014 Union Pacific Corporation (UNP)

2. Today’s Agenda  Introduction  Macroeconomic Overview  Industry Analysis  Business Operations and Segments  Stock Market Performance  Financial Analysis  Valuation  Recommendation 2

3. Introduction to Union Pacific  Incorporated in 1862 and headquartered in Omaha, Nebraska  Operates 31,838 miles of track  Largest publically traded railroad in the world  Union Pacific is the only railroad that serves all six significant gateways to Mexico  $52.57B in total assets as of September 30, 2014 3 UP 2014 Form 10K, Page 6

4. Current Position Purchased: 100 shares @$ 148.2 on April,2013 Cost basis: $14,820 2 for 1 split June, 9 th, 2014 Current Price: Closed @$114.94 on Dec 8th,2014 Market Value: $22,988 Gain: $8,168 (55.11%) 4

5. Macroeconomic Overview 5 An increasing U.S. population base will stimulate long-term growth for the goods carried. Significantly weaker coal market US energy boom: Major railroads’ revenue for hauling crude jumped from $25.8 million in 2008 to $2.15 billion in 2013 New Business: shale-related energy--Emerging market opportunity in southern region network Frac Sand & Pipe (inbound), Crude Oil (outbound) Oil prices: in the past, skyrocketing oil prices allowed rail to compete more effectively against trucking, which uses more fuel. 2013 10-K, Pg. 2

6. Macroeconomic Overview Neighbor’s Economic growth: the only railroad to serve all six major gateways to Mexico—an excellent position to benefit from economic growth in Mexico 3rd largest goods trading partner $507 billion in total (two ways) goods trade during 2013. 6

7. Macroeconomic Overview Keystone XL Pipeline  An oil pipeline system in US and Canada  Three phases of the project are in operation, and the fourth is awaiting U.S. government approval  Numerous Environmental Concerns  Recent Oil price drop increase  Still awaiting decision from the White House 7

8. Industry Overview  Railway transportation will likely continue its competitive advantage over costlier modes of transportation such as air or road.  VERY high barriers to entry in the industry  Trains have improved over the years: larger fleets, reduced crew size, and more logistical technology  1980 Staggers Act  Permitted sale, disposal, and combination of rail lines, which resulted in industry consolidation  North America numbered more than 40 Class I rails in 1980, but today there are just eight major railroads 8 http://www.fra.dot.gov/eLib/Details/L03012

9. Rail Carloads are Increasing 9

10. Industry Porter’s Five Forces Threat of New Entrants: Low Very capital intensive business with high barriers to entry Threat of Substitutes: Medium/High Alternatives to rail do exist, including road or air transit Rivalry Among Existing Firms: Medium Business is geographic by nature and dominated by a few firms Bargaining Power of Buyers: Low Very few competitors on railways, especially if you are going through a specific distribution channel Bargaining Power of Suppliers: High Only a few suppliers provide materials for and engineer trains Strict approval process before an item can become a part of the infrastructure 10

11. Business Operations 11 UP 2014 Form 10K, Page 22  UNP's income comes from the volume of freight contracts it sells and the price of those contracts  Volume has been the main driver  Relatively fixed expenses: labor, fuel, and track maintenance.  Utilize fuel surcharges to mitigate changing fuel costs, which accounted for gains of $2.6 billion in 2013

12. Business Segments Agricultural Transportation of grains, grain products, other food and beverage products Serve international markets in Pacific Northwest and Gulf Coast ports, as well as Mexico Automotive The largest automotive carrier west of the Mississippi Serves to connects to West Coast ports and the Gulf of Mexico for import and export shipments abroad Intermodal International business consists of import and export container traffic that mainly passes through West Coast ports Domestic business includes container and trailer traffic Chemicals Serves the chemical producing areas along the Gulf Coast, Rocky Mountains and on the West Coast. The Company’s chemical shipments include four broad categories: Petrochemicals, Fertilizer, Soda Ash, and Other Coal UP’s reach extends to eastern U.S. utilities, Mexico, Europe and Asia Industrial Products Several categories including construction products, minerals, consumer goods, metals 12 UP 2014 Form 10K, Page 22

13. Business Segments - Revenue 13 http://www.up.com/investors/attachments/factbooks/2013/fact_book.pdfhttp://www.up.com/investors/attachments/factbooks/2013/fact_book.pdf, page 12UP 2014 Form 10K, Page 22

14. Average Revenue Per Car (ARC) 14 UP 2014 Form 10K, Page 26 Freight revenues vary with volume (carloads) and ARC. Changes in price, traffic mix and fuel surcharges drive ARC. The company recognizes freight revenues as shipments move from origin to destination.

15. Stock Market Performance 15

16. 16

17. Significant Value Returned to Shareholders 17 http://www.up.com/investors/attachments/factbooks/2013/fact_book.pdfhttp://www.up.com/investors/attachments/factbooks/2013/fact_book.pdf, page 5

18. 18 http://www.up.com/investors/attachments/factbooks/2013/fact_book.pdfhttp://www.up.com/investors/attachments/factbooks/2013/fact_book.pdf, page 6

19. Recent Financial Performance  Third quarter business volumes, as measured by total revenue carloads, increased 7 percent compared to 2013.  Revenue from Mexico business increased 10% to $579 million in the third quarter of 2014 versus the  same period in 2013.  Diluted earnings per share of $1.53 improved 23 percent*  Operating ratio of 62.3 percent improved 2.5 points*  Third Quarter 2014 Freight Revenue Highlights by Segment  Industrial Products +19%  Agricultural Products +19%  Intermodal +15%  Chemicals +6%  Automotive +3%  Coal +2% 19 http://www.up.com/investors/attachments/earnings/2014/3q2014_pressrelease.pdf * Indicates all time quarterly record

20. Financial Performance 20 http://www.up.com/investors/attachments/factbooks/2013/fact_book.pdfhttp://www.up.com/investors/attachments/factbooks/2013/fact_book.pdf, page 5

21. SWOT Analysis Diversified business mix with strong pricing power and consistent revenue Large, established railroad network Strengths Labor unions Uncertain growth with fixed rails Only 2 suppliers for rail cars and maintenance of track Weaknesses US energy production Modernized fleet will reduce fuel expenses, increasing operating income Opportunities Keystone Pipeline Energy prices: crude and coal Regulations Threats 21

22. Financial Analysis - Ratios 22

23. Financial Analysis – DuPont Analysis 23

24. 24 Revenue Projection – Overall

25. Revenue Projection – Detailed 25

26. WACC 26

27. 27

28. 28

29. Recommendation 29