The total return for Union Pacific (NYSE:UNP) investors has risen faster than earnings growth over the last five years

Simply Wall St · 04/09 10:45

Union Pacific Corporation (NYSE:UNP) shareholders have seen the share price descend 16% over the month. But at least the stock is up over the last five years. In that time, it is up 40%, which isn't bad, but is below the market return of 86%.

In light of the stock dropping 12% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

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To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Over half a decade, Union Pacific managed to grow its earnings per share at 5.8% a year. This EPS growth is reasonably close to the 7% average annual increase in the share price. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. Rather, the share price has approximately tracked EPS growth.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growth
NYSE:UNP Earnings Per Share Growth April 9th 2025

It might be well worthwhile taking a look at our free report on Union Pacific's earnings, revenue and cash flow .

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Union Pacific's TSR for the last 5 years was 56%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We regret to report that Union Pacific shareholders are down 12% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 4.5%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 9% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 1 warning sign for Union Pacific that you should be aware of before investing here.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.