UNION PACIFIC Corporation

1. UNION PACIFICCorporation Nan Zhang and Bobby Zhou Presented March 14, 2019 NYSE:UNP

2. SELL Targetprice:$69.97 4-7-2015 Short 100 Shares @108 (100) 11-9-2015 Long 100 Shares @84.71 (200) • Valuation Techniques: • Comparable Companies • DCF 2 For 1 Split (100) -> (200) 4-25-2013 Long 100 Shares @148.20(74.10) (100)

3. Highlights Real GDP Revenue is largely a function of the Economy. Policy Tariff … UNPandrailroad industry is sensitive to import and export volumes, influenced heavily byglobal factors Operating Ratio is defined as operating expenses operating revenues Operation Efficiency Government interference Valuation BusinessDescription Industry Overview Risk

4. The rails are mature, cyclical,competitive businesses with Revenue growth in line with GDP Railroad businesses are very volume sensitive. The annual volume growth rate can be expected to be similar to the growth rate of the economy Volumes can be significantly impacted by any major movements in demand for key commodities such as coal, chemicals, and grain in particular. Valuation BusinessDescription Industry Overview Risk

5. DifferentialPricing:a mix of high demand-high margin and low demand-low margin traffic Railroads don’t have unlimited freedom to charge whatever they want. Surface Transportation Board can limit what the railroad can charge. The railroad operatorswould have to reduce its costs: Operational trends continued,employment decline “revenue to variable cost” R/VC ratio of less than 180 percent Valuation BusinessDescription Industry Overview Risk

6. Railroad Industry Competitive Landscape: internal competition is kept to aminimum high market concentrationamongthe largest industry operators PLUS Mexico Market Valuation BusinessDescription Industry Overview Risk

7. Railroad Industry Competitive Landscape: “MOAT” Porter’s Five Forces Railroads firms almost exclusively on infrastructure that they own, build, maintain, and pay for themselves. EconomicMoat: • Regulatory licenses and approvals • Uniqueness of its asset • (the location of the railway) Its relativelylow operating cost due in a large part to scale Valuation BusinessDescription Industry Overview Risk

8. Two KPI Tells Us What UNP need to Do: IMPROVE Operating Efficiency

9. UNP isimprovingOperating Efficiency, customer service, safetyand Financial performance IncorporatingPrecisionScheduled Railroading (PSR) strategy Unified Plan 2020 2015: “G55 + 0” Oct2018 ‘Evergreen,’ so everchanging FailedPlan EstimatetoFull Implementation ? 2017’s latter half: “Blend and Balance” plan Thistransportationplancalls for eventually attaining a 55 operating ratio, stillgoingon Mid-2019 Risks Valuation BusinessDescription Industry Overview Risk

10. Unified Plan 2020:OperatingRatio~60% ~ $500 million in productivity savings WebelieveUNPcanimproveitsoperatingefficiency: Railroad industry veteran Jim Vena New executive vice president and chief operating officer (or COO), with successful PSR experience Butinthelongterm: Growing infrastructure expenditure Depreciation costs increase Costmanagement-LIMITED … Valuation BusinessDescription Industry Overview Risk

11. Financial Performance: Reorganize Business into Four Segments: Valuation BusinessDescription Industry Overview Risk

12. Agricultural Products • Reduced Soybean Exports • Strong Demand for Biofuels • Increased Fertilizer Shipments Valuation BusinessDescription Industry Overview Risk

13. Energy + Petroleum Products – Frac Sand – Coal Headwinds Valuation BusinessDescription Industry Overview Risk

14. COAL VS INTERMODAL Valuation BusinessDescription Industry Overview Risk

15. Premium New International Business and Tariff Pull Ahead Positive Vehicle Mix Valuation BusinessDescription Industry Overview Risk

16. Industrial Valuation BusinessDescription Industry Overview Risk

17. AS last 5-years 10K SAID, REVENUE GROWTH DRIVERS: Management Guidance: core pricing gains fuel surcharge revenue Price Over Inflation Low to Mid Single Digit Volume Growth volume Do Not Expect Improved Operating Ratio Performance Year-over-Year Real GDP Valuation BusinessDescription Industry Overview Risk

18. DCF: Revenue growth in line with GDP Target Price: $69.97 GDP Rev.Growth Valuation BusinessDescription Industry Overview Risk

19. Peer Multiple Valuation $160.93 EPS=8.47 Average P/E=18.64 Valuation BusinessDescription Industry Overview Risk

20. Peer Multiple Valuation: P/E ~19x UNPisoutperformed Valuation BusinessDescription Industry Overview Risk

21. The market price is too high… • Steady Growth in Transportation in the US • Infrastructure Enhancement Could Improve Revenues • Partnerships Help the company to Improve Revenue • Diversified End Markets • Strong Operational Network • Financial Performance Possibility Financial Risk Business Risk Industry Risk High STRENGTH OPPORTUNITIES Economy Risk Fuel Expense S W O T Regulation Operational Risk THREATS WEAKNESS Debt Burden • Increasing Debt Burden • Heavy Dependence on Few Suppliers of Rail and Locomotives • Government Regulation • The Probable Down Turn in Economic Supply Chain Competition Low Big Small Impact Valuation Risk BusinessDescription Industry Overview

22. Scenario Analysis Economy Situation 25% 10% 55% 10% Valuation Risk BusinessDescription Industry Overview

23. Sell 100 shares at the market Early Quit (Hopefully) Late Quit (Definitely) Sell 100 Shares Consider Enter Again 2019 2020 …