Union Pacific Corporation

The leadership of Union Pacific Corporation (UPC), the largest public railroad transportation company in the United States, needed to decide whether the company should reestablish its share-buyback program. The freight recession of 2019 and the decline in shipping volumes caused by the start of the COVID-19 pandemic in 2020 had not been gentle on the freight industry overall, and UPC had been no exception. The company had been able to maintain its dividend policy, but suspended its share-repurchase program during the second half of 2020. By the end of 2020, UPC’s management saw signs of V-shaped economic recovery. Was it time for UPC to reinstate the company’s share-repurchase program? The case allows instructors to pursue two avenues of discussion. First, it calls students to value UPC to assess whether the company is under- or overvalued. The case gives students sufficient information to implement the discounted cash flow valuation of the company as well as valuation using multiples. Second, the case offers rich context for a discussion of the tradeoffs between dividends and share repurchases. This case has been successfully taught at the University of Virginia Darden School of Business in the Enterprise Valuation module of the course "Financial Management and Policies," which is an integral part of Darden’s core curriculum for MBA students. The case integrates a variety of subjects including forecasting, financing, and investment analysis. Students are asked to calculate the implied enterprise value and share price of a corporation by building a DCF model.