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    UNP
    Earnings call· Mar 2026(Q1 FY26)

    UNION PACIFIC Q1 FY26 earnings call UNP

    Apr 23, 2026 Source

    Executive summary

    Union Pacific Q1 FY26 — Record Operating Income and Net Income

    Union Pacific delivered record first-quarter operating and net income, driven by strong operational execution and effective pricing strategies. Despite macro headwinds impacting volume in certain segments and a challenging fuel price environment, the company affirmed its full-year EPS and operating ratio guidance, demonstrating confidence in its ability to leverage productivity gains and service improvements for continued growth. The company remains highly convicted in its proposed merger, emphasizing its benefits for the country, customers, and shareholders.

    Highlights

    5

    • Reported net income of $1.7 billion grew 5% year-over-year, setting a first quarter record.

    • Adjusted EPS increased 9% to $2.93, with adjusted net income up 7%.

    • Operating ratio improved 80 basis points to 59.9% (adjusted).

    • First quarter cash from operations totaled $2.4 billion, up 10% versus last year.

    • Freight revenue increased 4% to $5.9 billion, a first quarter record, driven by core pricing gains and higher fuel surcharge revenue.

    Concerns

    5

    • Lower volume reduced freight revenue by 75 basis points.

    • Core pricing for coal remained positive but at a lower rate than last year.

    • Impacts from competitive and global environment in select agricultural markets.

    • Premium revenue declined 5% on a 9% decrease in volume, with international intermodal volumes down 28%.

    • Softening vehicle sales pressured automotive volumes.

    Guidance & targets

    9
    CategoryTargetConfidence
    Reported EPS growth
    mid-single-digit growth
    high materiality
    High
    Operating ratio improvement
    improvement
    high materiality
    High
    EPS growth CAGR
    high single-digit to low double-digit
    high materiality
    High
    Coal results
    positive
    medium materiality
    Medium
    Industrial production
    outperform industrial production
    medium materiality
    High
    Construction and Petrochemicals volume
    strong volume to continue
    medium materiality
    High
    International intermodal volumes
    remain subdued
    medium materiality
    Medium
    Automotive volumes
    business development wins will offset some of the impact
    medium materiality
    Medium
    Merger approval
    second quarter next year
    high materiality
    Medium

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Total Freight Revenue
    Set a first quarter record. Lower volume reduced freight revenue by 75 basis points. Core pricing exceeded inflation dollars.
    Volume: 1% lowerFuel surcharge contribution to freight revenue: 100 bpsCore pricing and business mix contribution to freight revenue: 325 bps
    		$5.9 billion4%——
    Bulk
    Driven by strength in coal (utility demand, natural gas pricing, new business with LCRA) and record grain volume (export demand to China, Mexico expansion).
    Volume: 12% increase
    		—10%——
    Industrial
    Delivered a record first quarter, outperforming the market. Strength in construction projects (LNG terminals, data centers) and petrochemicals.
    Volume: 4% increaseCore pricing: best ever quarterly average revenue per car
    		—5%——
    Premium
    Reflecting business mix and higher fuel surcharges. International intermodal volumes declined 28% due to lower West Coast imports and customer shifts. Domestic intermodal delivered its third consecutive record quarter.
    Volume: 9% decreaseAverage revenue per car: 4% increase
    		—-5%——

    Operational metrics

    32
    Adjusted Net Income
    $1.7 billionup 7%
    Q1 FY26

    Excluding merger costs.

    Adjusted EPS
    $2.93increased 9%
    Q1 FY26

    Excluding merger costs.

    Adjusted Operating Ratio
    59.9%improved 80 bps
    Q1 FY26

    Excluding merger costs.

    Other Revenue
    $324 milliondeclined 4%
    Q1 FY26

    Driven by lower subsidiary revenue, lapping metro transfer in Q1 2025.

    Total Operating Expense
    $3.8 billionincreased 3%
    Q1 FY26
    Compensation and Benefits Expense
    1%increased
    Q1 FY26

    Impact of inflation almost entirely offset by record first quarter workforce productivity.

    Cost per Employee
    6.5%increased
    Q1 FY26

    Driven by higher wages, benefits, and increased incentive compensation.

    Full-year Compensation per Employee increase
    4% to 5%
    FY26

    Expected increase, working to offset cost inflation.

    Fuel Expense
    7%grew
    Q1 FY26

    On a 7% increase in average fuel price.

    Average Fuel Price
    $2.69from $2.51
    Q1 FY26

    Year-over-year increase.

    Purchase Services and Materials Expense
    7%increased
    Q1 FY26

    As a result of merger-related costs.

    Equipment and Other Rents
    9%declined
    Q1 FY26

    With record first quarter cycle times.

    Net Debt
    $1.2 billiondecreased
    Q1 FY26

    Due to long-term debt repayment.

    Adjusted Debt-to-EBITDA Ratio
    2.5x
    Q1 FY26

    Company maintains A ratings from 3 credit rating agencies.

    Original Diesel Fuel Estimate
    $2.35
    FY26

    Established in January, now harder to predict due to volatility.

    Average Fuel Price (April)
    over $4
    April 2026

    Expected average for the month of April, will pressure margins.

    Freight Revenue Growth (excluding fuel surcharge)
    3%
    Q1 FY26

    Set a first quarter record.

    Workforce Reduction
    5%smaller workforce
    Q1 FY26

    Achieved through record first quarter workforce productivity.

    Freight Car Velocity
    235increased 9%
    Q1 FY26

    Set a first quarter record.

    Terminal Dwell
    19.711% better than last year
    Q1 FY26

    Best-ever, second quarter below 20 hours.

    Intermodal Service Performance Index (SPI)
    98%4-point improvement
    Q1 FY26

    Compared to best service lines in 2025.

    Manifest Service Performance Index (SPI)
    98%5-point improvement
    Q1 FY26

    Compared to best service lines in 2025.

    Locomotive Productivity
    6%improved
    Q1 FY26

    Best ever quarter.

    Average Active Locomotives
    4%decreased
    Q1 FY26

    With higher gross ton miles, highlighting efficiency gains.

    Workforce Productivity (all employees)
    7%increased
    Q1 FY26

    Set a first quarter record.

    Active Train Engine and Yard Workforce
    4%decreased
    Q1 FY26

    On a 1% reduction in car load levels, demonstrating volume variability discipline.

    Train Length
    3%grew
    Q1 FY26

    Compared to last year, best ever quarter, generating latent capacity.

    Trains Running (vs 2019)
    24% lessless than 2019
    Current

    Operating higher volume than 2019 with significantly fewer trains.

    New Construction Projects Closed
    20
    Q1 FY26

    Most are on the carload side, with a strong pipeline.

    Merger Support Letters (Customers)
    520
    Current

    Signed letters of support for the merger.

    Merger Support Letters (Commercial Partners)
    700
    Current

    Signed letters of support for the merger.

    Merger Support Letters (Total)
    2,000
    Current

    Total signed letters of support for the merger.

    Industry KPIs

    13
    MetricValueDetails
    Safety—
    Volume1% lower%
    Fuel efficiency—
    Operating ratio59.9%%
    Service metrics98%%
    Network fluidity235miles per day
    Merger synergy metrics520 customers, 700 commercial partners, 2,000 totalletters of support
    Revenue per car per rtm—
    Pricing vs rail inflation325 bpsbps
    Fuel surcharge diesel price$608 millionUSD
    Labor productivity headcount7%%
    Industrial development pipeline20projects
    Tariff trade policy revenue impact—

    Deals & partnerships

    4
    LCRANew business

    New business started in April of last year, contributing to coal volume growth.

    BartlettNew facility expansion

    New facility in Monterrey, Mexico, contributing to grain export expansion.

    Golden Triangle Polymers Company joint venture with CPChemJoint Venture

    New world-scale facility expected to start up in the third quarter.

    BMWIncremental volume win

    Won incremental volume with BMW, helping to mitigate pressure from softening vehicle sales.

    Capital programs

    1
    Capacity Projectsunderway
    Period spend: $500 million to $700 million

    Benefit: siding extensions, siding constructions, expansion of terminals

    Annual investment to maintain and expand capacity, ensuring readiness for growth.

    Risks & headwinds

    7
    Lower Volume Impact on Freight RevenueQ1 FY26

    Reduced freight revenue 75 basis points

    Mitigation: Strong operating performance and productivity initiatives to win new business.

    Competitive and Global Environment in Agricultural MarketsQ1 FY26

    Impacts in select agricultural markets

    Mitigation: Well-positioned to compete due to strong operating performance and productivity.

    Softening Vehicle SalesQ1 FY26 and ongoing

    Pressured automotive volumes

    Mitigation: Business development wins expected to offset some of the impact.

    International Intermodal Volume DeclineQ1 FY26

    Declined 28% versus last year

    Mitigation: Expect volumes to remain subdued, but will lap some shifts experienced last year.

    Fuel Price VolatilityQ1 FY26 and Q2 FY26

    Average fuel price increased 7% YoY to $2.69/gallon in Q1; April expected to average over $4/gallon

    Mitigation: Driving efficiency, business development, and consistent pricing to offset impact and achieve OR improvement.

    Soft Housing Environment and Tepid End Market FundamentalsOngoing

    null

    Mitigation: Firmly focused on outperforming industrial production through customer wins.

    Merger ConcessionsDuring merger approval process

    Competitors seeking concessions that would open up the railroad for no reason

    Mitigation: Not prepared to give concessions that are not fundamentally about competition; focused on benefits for customers and country.

    Q&A highlights

    8

    Asked about management's confidence in the merger approval given the extended timeline and if the market's reaction (stock trading) suggests larger concessions.

    CEO Jim Vena stated increased conviction in the merger's benefits for the country, customers, and shareholders, despite the extended timeline. He highlighted the compelling case for seamless operations, new market access, and guaranteed employee jobs. He also noted that the company's focus remains on operating the railroad effectively regardless of the merger process.

    “I'm more convicted today than I was when we put the application in the first time, Scott.”

    asked by Scott Group · answered by Vincenzo Vena

    2 min read6 chapters

    Detailed Narrative

    01

    Strong Q1 Performance and Operational Excellence

    Union Pacific reported record first-quarter operating income and net income, with adjusted EPS increasing 9% to $2.93. The company achieved an adjusted operating ratio of 59.9%, an 80 basis point improvement. These results were driven by strong operational execution, including record workforce productivity and efficiency gains across the network, despite a 1% lower volume.

    02

    Merger Application Update and Conviction

    The company is on track to file a revised merger application by April 30, confident that the additional information meets the STB's expectations. Management expressed increased conviction in the merger's benefits, citing opportunities to expedite product movement, take trucks off highways, open new markets, and provide seamless service. They emphasized that the transaction is good for the country, customers, employees (guaranteed jobs), and shareholders.

    03

    Capacity and Volume Growth Readiness

    Union Pacific maintains significant latent capacity within its network, driven by improved train length (up 3%), terminal dwell times (19.7 hours, 11% better YoY), and ongoing investments in capacity projects. The railroad operates with over 100 fewer locomotives on the mainline compared to prior periods, indicating substantial buffer. This positions the company to handle significant volume growth without requiring substantial incremental capital or operating costs.

    04

    Technology and AI for Efficiency

    The company is actively leveraging AI and technology to enhance operations and service. Examples include an AI-informed automated movement planner for dispatching, Mobile NX for terminal automation, and a terminal command center for real-time intelligence and problem prediction. These tools aim to improve service consistency, drive efficiency, and enable quicker reactions to changing conditions, such as weather or business flow.

    05

    Customer and Market Dynamics

    Freight revenue grew 4%, with core pricing gains and fuel surcharge offsetting lower volume. Strength was noted in coal (12% volume increase) due to utility demand and new business, and grain (record volume) from export demand to China and Mexico. Industrial revenue was up 5% on 4% volume growth, driven by construction projects (LNG terminals, data centers) and petrochemicals. Domestic intermodal achieved its third consecutive record quarter, while international intermodal and automotive faced headwinds.

    06

    Fuel Price Volatility and Mitigation

    Fuel prices are expected to be a headwind, particularly in Q2, with April averaging over $4 per gallon, significantly higher than the original full-year estimate of $2.35. Despite this, the company remains confident in achieving its full-year operating ratio improvement through continued efficiency gains, business development, and consistent pricing for service value.

    AI-generated summary of the company’s earnings call. Not investment advice.