Union Pacific Posts Record Results as Volumes Grow 6%

Keypoints:

• Third-quarter net income was $2.1 billion, up 16%, with adjusted earnings per share of $3.53
• Operating revenue rose 15% to $7.2 billion
• Revenue carloads grew 6%, and intermodal revenue jumped 27%
• Fuel expense rose 69%, and fuel prices hurt the operating ratio by 140 basis points
• The railroad is waiting on a Surface Transportation Board review of its Norfolk Southern deal

Union Pacific reported record third-quarter results on 22 October. Net income rose 16% to $2.1 billion. Diluted earnings per share were $3.49, and adjusted earnings were $3.53, up 15%. Operating revenue grew 15% to $7.197 billion. Chief executive Jim Vena said the railroad handled six percent volume growth while delivering the service it sold.

Volume came from several directions. Revenue carloads rose 6% to 2.293 million. Intermodal, which moves containers and trailers, drove the largest gain. Its revenue jumped 27% to $1.517 billion, and carloads rose 11%. Energy and specialized markets revenue grew 18%, and metals and minerals rose 17%. Grain and grain products revenue grew 11%, with carloads up 5%. Average revenue per car rose 8% to $2,971.

Fuel was the drag. Locomotive fuel cost $4.21 a gallon, up 64% from last year. Fuel expense rose 69% to $1.04 billion. The reported operating ratio, which measures expenses as a share of revenue, improved 10 basis points to 59.1%. The adjusted ratio worsened 30 basis points to 58.8%. Higher fuel prices cost the company 140 basis points.

Efficiency improved. Workforce productivity rose 5% to 1,219 car miles per employee. Average terminal dwell fell 2% to 19.9 hours, and fuel consumption per ton-mile improved 2%. Service indices slipped, however. The intermodal index fell to 92 from 98, and the manifest index fell to 93 from 100.

Cash generation was strong. Free cash flow reached $2.36 billion for the first nine months, up from $1.86 billion. Dividends were $1.42 per share for the quarter. The 2026 capital plan is $3.5 billion. Share repurchases nearly stopped at $26 million, compared with $2.7 billion a year earlier, while the company pursues its acquisition of Norfolk Southern.

Vena said Union Pacific looks forward to the next steps of the Surface Transportation Board's merger review. Management calls the economic forecast mixed. Shares rose about 3.6% on the day.