Union Pacific Corporation (NYSE: UNP) owns the Union Pacific Railroad Company, one of America's leading transportation companies and operator of one of the largest railroads in North America. The Union Pacific railroad stretches from Chicago to the Pacific Ocean and is the only railroad that serves all six significant gateways to Mexico. UNP caters to six commodity groups: agricultural, automotive, chemicals, energy, industrial products, and intermodal shipping
Union Pacific operates the Union Pacific Railroad, a freight railroad linking 23 states in the western two-thirds of the United States. The railroad serves six different sectors, with energy, industrial products, and agricultural shipments accounting for 56% of the company's revenues. UNP's income depends on the volume of freight contracts it sells and the price of those contracts while its expenses primarily consist of labor, fuel costs, and track maintenance.
Union Pacific only has one reportable operating segment: its railroad segment. This segment operates a railroad with over 32,000 route miles that links Pacific Coast and Gulf Coast ports with the Midwest and eastern United States gateways . It also provides access to several key Mexican gateways and imports and exports freight across the Canadian and Mexican borders. Although Union Pacific's rail network is well-integrated across commodity groups, energy and industrial products are its biggest revenue generators,.
Energy (around 20% of revenue): UNP's energy shipments primarily consist of coal and coke shipments to utilities, factories, and water terminals. Coal from the Southern Powder River Basin in Wyoming is the biggest driver of UNP's energy freight revenue growth.
Industrial Products (around 15% of revenue): This sector includes lumber shipments, steel, construction products, paper, consumer goods, metals, and industrial minerals. Transportation services for government entities and waste companies are also included in the "Industrial Products" tally.
Agricultural (around 20% of revenue): UNP's agricultural shipments include whole grains, commodities produced from these grains, and food and beverage products including fresh and frozen fruits and vegetables, dairy products, and beverages. Union Pacific has exposure to most of the United States' primary grain markets and creates a link between producing areas in the Midwest and West with Pacific Northwest export terminals, Gulf ports, and Mexico.
Intermodal (around 15% of revenue): Intermodal shipments consist of a hodgepodge of container and trailer shipments as well as time-sensitive delivery services for businesses willing to pay a premium. UNP's intermodal business is done with both domestic and international clients.
Chemicals (15% of 2009 Freight Revenue): Union Pacific services chemical-producing areas along the Gulf Coast and in the Rocky Mountain region and two-thirds of UNP's chemical shipments are liquid and dry chemicals, plastics, or liquid petroleum products. The company ships soda ash from Wyoming and California to glass producers all over the country as well as fertilizer from the Gulf Coast, West Coast, and Canada to farmers in the Midwest.
Automotive (around 10% of revenue): UNP is the largest automotive carrier west of the Mississippi River; it acts as the shipper for seven vehicle assembly plants and distributes imported vehicles from six West Coast ports and Houston, ultimately delivering finished cars to around 40 automotive distribution centers where they are taken to dealerships by truck. The company also transports automotive parts.
A report presented by the U.S. Senate Commerce Committee it is stated that the discretionary pricing power enjoyed by the freight rail transport companies are putting excessive pressure on freight customers. The freight railroad operators are enjoying this pricing power since 1980 when the U.S. government adopted an act to improve profitability of the railroad industry by allowing rail transporters to hike price on captive shippers like electric utilities, chemical and agricultural companies in order to improve profitability of the struggling railroad industry. If this act is to be reversed, the entire freight railroad industry may be severely affected. 
Both national and international economic conditions affect the demand for the commodities that UNP transports; the state of the economy directly affects the amount of goods being shipped and UNP freight orders being placed. For example, a significant change in the U.S. economic climate can affect automobile purchases and hurt UNP's business with General Motors, one of its two biggest customers. Furthermore, international economic shifts directly affect UNP's intermodal segment, which deals with imports and exports.]]
Labor is the largest operating expense for UNP and about 86% of UNP's 48,242 employees are part of a railroad union. Maintaining union-level wages, hours, and working conditions resulted in compensation and benefits for employees accounting for 28.8% of the company's total expenses in 2009. The high percentage of unionized employees also makes UNP especially vulnerable to strikes, work stoppages, or work slowdowns. 
Oil prices have a significant impact on Union Pacific's expenses. UNP uses a fuel surcharge program to offset expenses related to rising oil prices but surcharge rates for any given month are set two months in advance and consequently reflect outdated oil prices; as a result, the fuel surcharge does not always protect UNP from losses related to oil volatility.
Severe weather and natural disasters can delay or disrupt railroad operations and result in revenue loss. Damaged infrastructure resulting from such weather also increases track maintenance costs. Track delays and closings disrupt damaged areas and can easily spread delays and stoppages throughout UNP's entire rail network.
UNP's main competition comes from other railroads, the long-haul trucking industry, and barge operators. Burlington Northern Santa Fe Corporation is UNP's most significant railroad competitor while the company's competition with non-railroad freight services is difficult to quantify.