Our ratings on Omaha-based Union Pacific Corp. reflect the favorable risk characteristics of the U.S. freight railroad industry, as well as the company's solid competitive position, moderate financial policies, and "strong" liquidity. Price competition from other railroads and trucking companies on selected commodities and the company's high capital requirements, typical of the industry, somewhat offset these strengths. We characterize the company's business risk as "strong," its financial risk as "intermediate," and its liquidity as "strong" under our criteria. Union Pacific operates a large rail network, covering 23 states across the western U.S. It has a well-diversified traffic base consisting of energy (largely coal; 20% of freight revenues for the nine months ended Sept. 30, 2012), intermodal (20%), agricultural products (17%),
