Union Pacific: Quality franchise with strong entry barriers and duopoly economics finds the best operator

5. Risks

The risk to the thesis could be from either of the following:

1. UNP is unable to substitute coal with merchandise, including e-commerce
2. The advent of electric trucks (with better fuel and battery technology) which can move long-haul more economically and take market share back from the rails
3. Surface Transport Board (STB) declaring that the railroads have become ‘Revenue Adequate’, hence restricting their pricing power
4. Service disruption from PSR, leading to regulatory discontent
5. Any changes to the long-term economic competitiveness with the reduction in Capex