Union Pacific Corp. (NYSE:UNP)

Solvency ratios for the analyzed period demonstrate a generally improving financial position, though with some fluctuation. Overall, the company appears to be decreasing its reliance on debt financing relative to equity and assets between 2022 and 2025. However, levels in 2022 represent a peak in leverage that is then reduced over the subsequent years.

Debt to Equity

The debt to equity ratio increased from 2.10 in 2021 to 2.74 in 2022, indicating increased financial leverage. This was followed by a decline to 2.20 in 2023, and continued downward to 1.85 in 2024 and 1.72 in 2025. This suggests a reduction in the proportion of debt financing compared to equity over the latter part of the period.

Debt to Capital

The debt to capital ratio followed a similar pattern to debt to equity, rising from 0.68 in 2021 to 0.73 in 2022, then decreasing to 0.69 in 2023, 0.65 in 2024, and 0.63 in 2025. This indicates a decreasing proportion of debt in the company’s capital structure.

Debt to Assets

The debt to assets ratio increased from 0.47 in 2021 to 0.51 in 2022, before declining to 0.49 in 2023 and stabilizing at 0.46 for both 2024 and 2025. This suggests a decreasing proportion of assets financed by debt.

Financial Leverage

Financial leverage, measured as total assets to equity, peaked at 5.38 in 2022, following an increase from 4.49 in 2021. It then decreased consistently to 4.54 in 2023, 4.01 in 2024, and 3.77 in 2025, mirroring the trends observed in the other debt ratios. This indicates a diminishing reliance on leverage to generate returns.

Coverage Ratios

Interest coverage decreased from 8.33 in 2021 to 8.14 in 2022, then to 7.14 in 2023, before recovering to 7.93 in 2024 and 8.00 in 2025. Fixed charge coverage exhibited a similar trend, declining from 6.81 in 2021 to 5.82 in 2023, and then increasing to 6.47 in 2024 and 6.68 in 2025. These ratios suggest the company’s ability to meet its fixed financial obligations remained relatively stable, with a temporary dip in 2023, followed by improvement.

The inclusion of operating lease liabilities in the calculations generally results in higher ratios compared to those excluding them, indicating the impact of lease obligations on the company’s reported debt levels. The trends, however, remain consistent regardless of whether operating lease liabilities are included.

The debt to equity ratio exhibited considerable fluctuation over the five-year period. Initially, the ratio increased before demonstrating a consistent decline.

Debt to Equity Ratio - Overall Trend

The debt to equity ratio began at 2.10 in 2021, increased to a peak of 2.74 in 2022, and then decreased steadily to 1.72 by 2025. This indicates an initial increase in financial leverage followed by a period of deleveraging.

Debt to Equity Ratio - 2021 to 2022

From 2021 to 2022, the debt to equity ratio rose from 2.10 to 2.74. This increase suggests the company financed a greater proportion of its assets with debt relative to equity during this period. The increase of 0.64 represents a substantial shift in the capital structure.

Debt to Equity Ratio - 2022 to 2025

Following the peak in 2022, the ratio decreased each year, moving from 2.74 to 2.20 in 2023, then to 1.85 in 2024, and finally to 1.72 in 2025. This consistent decline suggests a reduction in financial risk as the company relied less on debt financing and/or increased its equity base.

Supporting Financial Item Trends

Total debt decreased from US$33,326 million in 2022 to US$31,814 million in 2025, contributing to the declining ratio. Simultaneously, common shareholders’ equity increased from US$12,163 million in 2022 to US$18,467 million in 2025, further driving down the debt to equity ratio.

The observed trend suggests a deliberate strategy to improve the company’s financial position by reducing its reliance on debt and strengthening its equity base.

The debt to equity ratio, incorporating operating lease liabilities, demonstrates a fluctuating pattern over the five-year period. Initially, the ratio increased before exhibiting a consistent decline.

Overall Trend

From 2021 to 2022, the debt to equity ratio rose from 2.22 to 2.87, indicating an increased reliance on debt financing relative to equity. Subsequently, the ratio decreased each year, falling to 1.78 by 2025. This suggests a strengthening of the equity position or a reduction in debt, or a combination of both.

Debt Levels

Total debt, including operating lease liability, increased from US$31,488 million in 2021 to US$34,957 million in 2022. Following this peak, debt levels decreased to US$32,822 million in 2025, although the decline was not monotonic, with a slight increase from 2022 to 2023.

Equity Levels

Common shareholders’ equity experienced a decrease from US$14,161 million in 2021 to US$12,163 million in 2022. However, equity then increased consistently through 2025, reaching US$18,467 million. This growth in equity contributed to the observed decline in the debt to equity ratio.

Ratio Interpretation

The initial increase in the debt to equity ratio in 2022 signaled higher financial leverage. The subsequent decline indicates a reduced level of financial risk, as the company is financing a smaller proportion of its assets with debt. A ratio of 1.78 in 2025 suggests a more balanced capital structure compared to the 2022 level.

The observed trends suggest a deliberate effort to manage the capital structure, potentially through debt reduction or equity enhancement, resulting in a more conservative financial profile by the end of the analyzed period.

The Debt to Capital ratio for the analyzed period demonstrates a fluctuating, yet generally decreasing, trend. Initial values indicate a moderate level of debt relative to capital, which subsequently shifts before stabilizing. A detailed examination of the ratio’s behavior over the five-year period follows.

Overall Trend

The Debt to Capital ratio experienced an initial increase from 0.68 in 2021 to 0.73 in 2022. Following this peak, the ratio exhibited a consistent downward trend, decreasing to 0.63 by 2025. This suggests a gradual reduction in the company’s reliance on debt financing relative to its capital base.

Year-over-Year Changes

From 2021 to 2022, the ratio increased by 0.05, indicating a rise in debt levels or a decrease in capital. The subsequent year, 2023, saw a decrease of 0.04, suggesting a recalibration of the debt structure or an increase in capital. The decline continued from 2023 to 2024 with a reduction of 0.04, and then a smaller decrease of 0.02 from 2024 to 2025. These successive declines suggest a deliberate strategy to improve the company’s financial leverage.

Magnitude of Change

The largest single-year change occurred between 2021 and 2022, with an increase of 0.05. The most substantial decrease was observed between 2022 and 2023, also with a change of 0.04. The later decreases, while consistent, were more moderate, indicating a slowing rate of deleveraging.

Final Position

The ratio concluded the period at 0.63 in 2025, representing a decrease of 0.05 from the initial value in 2021. This final value suggests a more conservative capital structure compared to the beginning of the analyzed timeframe.

In summary, the Debt to Capital ratio indicates a period of initial increased leverage followed by a sustained effort to reduce debt relative to capital. The trend suggests improving solvency and a potentially more stable financial position as the period concludes.

The debt to capital ratio, inclusive of operating lease liabilities, exhibits a generally decreasing trend over the five-year period. Total debt, including operating lease liability, initially increased between 2021 and 2022, but subsequently declined through 2024, with a slight increase in 2025. Total capital, inclusive of operating lease liability, consistently increased throughout the period. The combined effect of these movements is a reduction in the debt to capital ratio.

Debt to Capital Ratio Trend

The ratio began at 0.69 in 2021, rose to a peak of 0.74 in 2022, and then decreased to 0.64 by 2025. This indicates a diminishing proportion of debt financing relative to total capital over the observed timeframe.

Total Debt (including operating lease liability)

Total debt increased from US$31,488 million in 2021 to US$34,957 million in 2022, representing a significant rise. However, it then decreased to US$32,463 million in 2024 before increasing slightly to US$32,822 million in 2025. This suggests a period of debt accumulation followed by a focus on debt reduction, with a minor reversal in the most recent year.

Total Capital (including operating lease liability)

Total capital demonstrated consistent growth, increasing from US$45,649 million in 2021 to US$51,289 million in 2025. This steady expansion of the capital base likely reflects retained earnings and potentially equity issuances, contributing to the overall decline in the debt to capital ratio.

The observed decrease in the debt to capital ratio suggests improving solvency. The company appears to be relying less on debt financing as its capital base expands. The slight increase in debt in 2025 warrants monitoring to determine if it represents a change in financial strategy or a temporary fluctuation.

The Debt-to-Assets ratio for the analyzed period demonstrates a fluctuating, yet generally stabilizing, trend. Initially, the ratio increased before exhibiting a slight decline and subsequent stabilization. This suggests a dynamic approach to capital structure management.

Overall Trend

The Debt-to-Assets ratio began at 0.47 in 2021, increased to 0.51 in 2022, then decreased to 0.49 in 2023. The ratio continued to decline to 0.46 in 2024 and remained constant at 0.46 in 2025. This indicates an initial increase in leverage followed by a period of deleveraging and stabilization.

Year-over-Year Changes

From 2021 to 2022, the ratio increased by 0.04, representing a 8.5% rise in debt relative to assets. This was the largest single-year increase in the observed period. The subsequent year, 2023, saw a decrease of 0.02, or approximately 3.9%, indicating a slight reduction in leverage. The decrease continued from 2023 to 2024, with a reduction of 0.03, or 6.1%. The ratio remained unchanged from 2024 to 2025.

Debt and Asset Movements

Total debt increased from US$29,729 million in 2021 to US$33,326 million in 2022, contributing to the initial rise in the ratio. While debt decreased to US$32,579 million in 2023 and further to US$31,192 million in 2024, it experienced a slight increase to US$31,814 million in 2025. Total assets consistently increased throughout the period, moving from US$63,525 million in 2021 to US$69,698 million in 2025. The combined effect of these movements explains the observed ratio fluctuations.

The stabilization of the Debt-to-Assets ratio at 0.46 in the final two years of the period suggests a deliberate effort to maintain a consistent capital structure. The company appears to be managing its debt levels in relation to its asset base, potentially indicating a focus on financial stability.

The debt to assets ratio, including operating lease liability, exhibited a fluctuating pattern over the five-year period. Initially, the ratio increased before stabilizing and then demonstrating a slight decline.

Debt to Assets Ratio Trend

In 2021, the debt to assets ratio stood at 0.50. This ratio increased to 0.53 in 2022, indicating a higher proportion of assets financed by debt. The ratio then decreased slightly to 0.51 in 2023. A more noticeable decrease occurred in 2024, with the ratio falling to 0.48. This downward trend continued into 2025, with the ratio reaching 0.47.

The observed trend suggests a gradual reduction in the company’s reliance on debt financing relative to its asset base during the latter part of the analyzed period. While debt levels remained relatively stable, asset growth contributed to the decreasing ratio. The increase in 2022 warrants further investigation to understand the drivers behind the increased leverage at that time.

Total Debt

Total debt, including operating lease liability, increased from US$31,488 million in 2021 to US$34,957 million in 2022. Subsequently, it decreased to US$34,179 million in 2023 and further to US$32,463 million in 2024. The final year observed, 2025, showed a slight increase to US$32,822 million.

Total Assets

Total assets demonstrated consistent growth throughout the period, increasing from US$63,525 million in 2021 to US$69,698 million in 2025. The annual increases were generally incremental, with the largest increase occurring between 2024 and 2025.

The combination of relatively stable debt levels and growing assets contributed to the observed decline in the debt to assets ratio in the later years. This suggests improving solvency from the perspective of this specific ratio.

An examination of the financial information reveals trends in the company’s financial leverage over a five-year period. Total assets exhibited a consistent upward trajectory, increasing from US$63,525 million in 2021 to US$69,698 million in 2025. Common shareholders’ equity also generally increased, though with some fluctuation, rising from US$14,161 million in 2021 to US$18,467 million in 2025.

Financial Leverage

The financial leverage ratio demonstrated a notable increase from 4.49 in 2021 to 5.38 in 2022. This indicates a greater reliance on debt financing relative to equity during that period. Subsequently, the ratio decreased to 4.54 in 2023, continued its decline to 4.01 in 2024, and further decreased to 3.77 in 2025. This downward trend suggests a reduction in the company’s reliance on debt financing, or an increase in equity financing, over the latter part of the observed period. The decrease in financial leverage from 2022 to 2025 coincides with the growth in common shareholders’ equity, suggesting equity financing contributed to the reduction.

The observed changes in financial leverage, in conjunction with the growth in both total assets and shareholders’ equity, suggest a strengthening financial position over the analyzed timeframe. While leverage initially increased, the subsequent reduction indicates a more conservative capital structure towards the end of the period.

The period under review demonstrates fluctuations in the company’s ability to meet its interest obligations. Earnings before interest and tax (EBIT) and interest expense both exhibit generally increasing values, though not consistently. The resulting interest coverage ratio shows a corresponding pattern of initial decline followed by stabilization and slight improvement.

EBIT

Earnings before interest and tax increased from US$9,635 million in 2021 to US$10,343 million in 2022, representing a growth of approximately 7.3%. A subsequent decrease was observed in 2023, with EBIT falling to US$9,573 million. This was followed by a recovery to US$10,063 million in 2024 and further growth to US$10,475 million in 2025. Overall, EBIT demonstrates a generally upward trend, despite the intermediate decline.

Interest Expense

Interest expense increased steadily from US$1,157 million in 2021 to US$1,340 million in 2023. A slight decrease was noted in 2024, with interest expense falling to US$1,269 million, before increasing again to US$1,309 million in 2025. The overall trend in interest expense is upward, though the rate of increase appears to be moderating in the later years.

Interest Coverage

The interest coverage ratio, calculated as EBIT divided by interest expense, decreased from 8.33 in 2021 to 8.14 in 2022. A more substantial decline occurred in 2023, with the ratio falling to 7.14. The ratio then recovered to 7.93 in 2024 and further improved to 8.00 in 2025. While the ratio experienced a low point in 2023, it has since shown signs of stabilization and modest improvement, remaining above 7.90 for the final two years of the period. This suggests a continued, though fluctuating, capacity to cover interest obligations.

The observed fluctuations in the interest coverage ratio are primarily driven by the interplay between EBIT and interest expense. The decline in 2023 coincided with a decrease in EBIT and an increase in interest expense, while the subsequent recovery was supported by a rebound in EBIT and a stabilization of interest expense.

The period between 2021 and 2025 demonstrates fluctuations in the company’s ability to meet its fixed financial obligations. Earnings before fixed charges and taxes, and fixed charges themselves, both experienced increases over the five-year period, though not consistently. The fixed charge coverage ratio, a key indicator of solvency, exhibited a more complex pattern.

Earnings Before Fixed Charges and Tax

Earnings before fixed charges and tax generally increased from US$9,938 million in 2021 to US$10,780 million in 2025. However, a decrease was observed between 2022 (US$10,681 million) and 2023 (US$9,942 million) before resuming an upward trajectory.

Fixed Charges

Fixed charges increased steadily from US$1,460 million in 2021 to US$1,614 million in 2025. The increase was most pronounced between 2021 and 2023, with more moderate increases in subsequent years. The value remained constant between 2023 and 2024.

Fixed Charge Coverage

The fixed charge coverage ratio decreased from 6.81 in 2021 to 6.64 in 2022, indicating a slight weakening in the ability to cover fixed charges with earnings. A more substantial decline occurred in 2023, with the ratio falling to 5.82. The ratio then recovered to 6.47 in 2024 and further improved to 6.68 in 2025, approaching the level observed in 2021. Despite the recovery, the ratio did not surpass its initial value during the analyzed period.

The fluctuations in fixed charge coverage suggest a dynamic relationship between earnings and fixed obligations. While earnings generally increased, the initial increase in fixed charges outpaced earnings growth in 2023, leading to a reduced coverage ratio. The subsequent stabilization of fixed charges, coupled with continued earnings growth, contributed to the ratio’s recovery in the later years of the period.