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    UNP
    Earnings call· Sep 2025(Q3 FY25)

    UNION PACIFIC CORP UNP

    Oct 23, 2025 Source

    Executive summary

    Union Pacific Q3 FY25 — Record Operating Performance and Strong EPS Growth Amidst Merger Progress

    Union Pacific delivered a strong Q3 FY25, marked by record operating performance and significant adjusted EPS growth, driven by core pricing gains and operational efficiencies. The company is actively progressing its merger application with Norfolk Southern, expecting to file by early December, while navigating a challenging volume environment, particularly in international intermodal. Management remains confident in its long-term strategy and ability to integrate the merger.

    Highlights

    5

    • Adjusted EPS increased 12% year-over-year to $3.08, excluding $41 million in merger-related costs.

    • Adjusted operating ratio improved by 180 basis points year-over-year to 58.5%.

    • Freight revenue, excluding fuel, grew 4% and set a best-ever quarterly record.

    • Set best-ever quarterly records in workforce productivity, fuel consumption, terminal dwell, and train length.

    • Cash from operations totaled $7.1 billion, up 6% or $381 million year-over-year.

    Concerns

    4

    • Fourth quarter volumes are currently running down 6%, primarily due to lower international intermodal volumes.

    • Lower fuel prices impacted freight revenue by 50 basis points, with surcharge revenue down $33 million.

    • Intermodal volumes were challenged by lower West Coast imports, resulting in a 17% decrease in international volumes.

    • Automotive volumes decreased due to reduced auto parts production and OEM quality holds.

    Guidance & targets

    3
    CategoryTargetConfidence
    3-year EPS CAGR
    high single to low double-digit growth
    high materiality
    High
    Full year compensation per employee increase
    around 3%
    medium materiality
    High
    Merger application filing with STB
    end of November or early December
    high materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Bulk
    Revenue and volume increased due to strong core pricing, coal demand (natural gas prices, LCRA shipments), export wheat, Mexico grain business, new grain products facilities, and increased potash shipments. Partially offset by lower fuel surcharges and business mix.
    Volume growth: 7%
    		Up 7%7%——
    Industrial
    Revenue and volume grew, driven by strong core pricing and increased demand in petrochemicals, constructions, and metal shipments. Partially offset by business mix, lower fuel surcharges, and decreased volume in energy and specialized markets.
    Volume growth: 3%Average revenue per carload growth: 1%
    		Up 3%3%——
    Premium
    Revenue declined due to a 5% decrease in volume, reflecting business mix and lower fuel surcharges. International intermodal volumes were challenged by lower West Coast imports. Domestic segment delivered record-breaking volumes. Automotive volume decreased due to reduced auto parts production and OEM quality holds.
    Volume decrease: 5%Average revenue per car growth: 3%International intermodal volume decrease: 17%
    		Declined 2%-2%——

    Operational metrics

    36
    Adjusted EPS
    $3.08Up 12% YoY
    Q3 FY25

    Adjusted for merger-related costs.

    Adjusted Operating Ratio
    58.5%Improved 180 bps YoY
    Q3 FY25

    Driven by core pricing gains and operational efficiencies.

    Freight Revenue ex-fuel growth
    4%
    Q3 FY25

    Sixth consecutive quarter of growth.

    Debt paid down
    $1 billion
    Q3 FY25

    Prioritizing debt reduction during merger process.

    Adjusted Debt-to-EBITDA ratio
    2.6xLower
    Q3 FY25

    Finished the quarter lower.

    Cash balance
    just over $800 million
    Q3 FY25

    After funding capital program and paying dividend.

    Dividend increase streak
    19th consecutive year
    Q3 FY25

    Annual dividend raise for shareholders.

    YTD EPS growth
    8%
    YTD FY25

    Reported year-to-date EPS growth.

    YTD Operating Ratio improvement
    80 basis points
    YTD FY25

    Year-to-date operating ratio improvement.

    Q4 Volume trend
    down 6%
    Q4 FY25

    Current trend for the fourth quarter.

    Freight Revenue impact from volume reduction
    25 basis points
    Q3 FY25

    Impact on freight revenue from slight volume decline.

    Freight Revenue impact from lower fuel prices
    50 basis points
    Q3 FY25

    Fuel was a modest headwind.

    Freight Revenue impact from core pricing and business mix
    350 basis points
    Q3 FY25

    Improvement versus 2024.

    Operating Expense growth
    1%
    Q3 FY25

    Overall operating expense increase.

    Compensation and Benefits decrease
    1%
    Q3 FY25

    More than offset wage inflation.

    Workforce levels decrease
    4%
    Q3 FY25

    Lower workforce levels.

    Compensation per employee increase
    2.5%
    Q3 FY25

    Year-over-year increase.

    Fuel Expense growth
    1%
    Q3 FY25

    Driven by GTM increase, partially offset by lower fuel prices and improved consumption.

    Fuel consumption rate improvement
    1%
    Q3 FY25

    Yielded benefits from fuel initiatives.

    Purchased services and materials expense increase
    6%
    Q3 FY25

    Due to merger-related costs.

    Equipment and other rents decline
    11%
    Q3 FY25

    Driven by contract settlements, improved cycle times, and lower car hire.

    Other Expense improvement
    1%
    Q3 FY25

    Improved versus last year.

    Workforce productivity improvement
    6%
    Q3 FY25

    Workforce productivity, including all employees.

    Active train engine and yard workforce decrease
    4%
    Q3 FY25

    Decrease in active workforce.

    Train length growth
    2%
    Q3 FY25

    Achieved despite mix headwinds from softer international intermodal shipments.

    Freight car velocity improvement
    8%
    Q3 FY25

    Best measure of fluidity on the railroad.

    Terminal dwell
    just over 20 hoursRecord
    Q3 FY25

    Contributed to freight car velocity improvement.

    Intermodal service performance
    98%Improved YoY
    Q3 FY25

    Service performance improved year-over-year.

    Manifest service performance
    100%Improved YoY
    Q3 FY25

    Service performance improved year-over-year.

    Locomotive productivity improvement
    4%
    Q3 FY25

    Reflecting the continued benefits associated with efforts to reduce locomotive dwell time.

    Locomotive dwell
    14.9 hoursRecord
    Q3 FY25

    Achieved goal to reduce locomotive dwell below 15 hours.

    Personal injury rate
    between 0.6 and 0.7Improved vs 3-year rolling average
    FY25 YTD

    Industry-leading safety numbers.

    Merchandise traffic transit time improvement (post-merger)
    15% to 20%
    Post-merger

    Expected quicker transit times by removing touch points and building through-blocks with the merged entity.

    Truck production decrease
    about 28%
    Current

    Current trend in truck production, impacting the intermodal market.

    New grain facilities added
    20
    Last few years

    New facilities added onto the network as part of business development efforts.

    New renewable facilities added
    18
    Last few years

    New facilities added onto the network as part of business development efforts.

    Industry KPIs

    11
    MetricValueDetails
    SafetyBetween 0.6 and 0.7
    VolumeDown slightly
    Operating ratio58.5%%
    Service metrics98%%
    Network fluidity226 miles per daymiles/day
    Merger synergy metricsOver 400customers
    Revenue per load ex fuel3.5%%
    Pricing vs rail inflation3.5%%
    Fuel surcharge diesel price$602 millionUSD
    Intermodal truckload volumeDown 17%%
    Labor productivity headcount6%%

    Deals & partnerships

    1
    Norfolk SouthernProposed merger to create America's first transcontinental railroad, enhancing competition and service.

    Over 400 customers and 1,200 stakeholders have provided letters of support. Agreements in principle with all unions regarding job guarantees. Merger application with STB expected to be filed by end of November or early December. Union Pacific is willing to provide access to locations that would go from two to one railroad options post-merger.

    Risks & headwinds

    5
    Q4 Volume DeclineQ4 FY25

    Volumes currently running down 6%

    Mitigation: Team is working hard to drive more volume; maintaining operational agility and resource buffers to handle volume fluctuations efficiently.

    Challenging Macroeconomic BackdropNear-term, extending into 2026

    Softer automotive sales and housing starts; 'freight recession' and weak truck market

    Mitigation: Focus on controlling fundamentals, driving value to customers, and pricing for that value; leveraging strong franchise and infrastructure investments to create own wins and penetrate markets.

    Merger-Related CostsQ4 FY25 and beyond

    Expected to continue in Q4, though likely lower than Q3

    Mitigation: Actively managing expenses and driving productivity gains to offset costs; prioritizing debt reduction and cash generation.

    Competitor and Association Opposition to MergerDuring STB approval process

    BN and other railroads publicly opposed; chemical associations vocal

    Mitigation: Management views competitor reaction as bolstering argument for enhanced competition; engaging directly with customers and associations to explain benefits; willing to provide access to locations that would go from 2 to 1 railroad options.

    Fuel Price HeadwindsQ3 FY25 (past impact), potential ongoing

    Surcharge revenue down $33 million; 50 bps impact on freight revenue

    Mitigation: Focus on fuel consumption rate improvement (1% improvement in Q3); leveraging operational efficiencies.

    What to watch in Q4 FY25

    5

    Merger Application Filing

    Q4 FY25
    CurrentExpected by end of November or early December
    TargetApplication filed with STB

    Why it matters

    This is a critical milestone for the proposed merger with Norfolk Southern, initiating the formal regulatory review process.

    So what I can tell you about the timing is it sure will not take us into January to get this done, okay? We're into getting the deal done as soon as possible. If you ask Jim Vena, I want it in, okay, before the 1st of December, the application. If you talk to some people on the team, they're saying, "Jeez! Jim Vena, would you give us a little bit of time?" And the answer is no. So I'm hoping that we can do everything we can to have it in by the end of November or the latest in early December so that we can have the application in and get that process moving.

    Q&A highlights

    6

    Asked for an update on the merger application, including progress on shipper and union support, and the expected filing timeline with the STB.

    Jim Vena detailed the company's strong service foundation, financial health (2.6x debt-to-EBITDA), and safety improvements as prerequisites for the merger. He emphasized the benefits for customers (faster, more efficient service) and the US economy, citing competition with Canadian railroads. He confirmed job guarantees for unionized employees and ongoing discussions with other unions. Kenny Rocker added that over 400 customers and 1,200 stakeholders have provided letters of support. Vena stated the application is expected by end of November or early December.

    “So what I can tell you about the timing is it sure will not take us into January to get this done, okay? We're into getting the deal done as soon as possible. If you ask Jim Vena, I want it in, okay, before the 1st of December, the application. If you talk to some people on the team, they're saying, "Jeez! Jim Vena, would you give us a little bit of time?" And the answer is no. So I'm hoping that we can do everything we can to have it in by the end of November or the latest in early December so that we can have the application in and get that process moving.”

    asked by Thomas Wadewitz · answered by Vincenzo Vena

    1 min read5 chapters

    Detailed Narrative

    01

    Operational Excellence and Record Performance

    Union Pacific achieved several best-ever quarterly operating records, including workforce productivity, fuel consumption, terminal dwell, and train length. Freight car velocity improved 8% to 226 miles per day, with September marking a record at over 230 miles per day. Terminal dwell reached a record low of just over 20 hours, contributing to significant productivity gains and customer efficiencies.

    02

    Strategic Merger Progress

    The company is actively pursuing its merger with Norfolk Southern, with the application expected to be filed with the STB by the end of November or early December. Management highlighted strong support from over 400 customers and 1,200 stakeholders, along with agreements with unions, emphasizing the merger's potential to enhance competition, improve service, and create a more efficient transcontinental railroad.

    03

    Market Dynamics and Pricing Power

    Despite a challenging macro backdrop with softer economic indicators like automotive sales and housing starts, Union Pacific demonstrated strong core pricing gains. The commercial team leveraged improved service to secure positive pricing, although international intermodal volumes faced headwinds, declining 17% due to lower West Coast imports and tough comparisons.

    04

    Capital Allocation and Financial Strength

    Union Pacific prioritized debt reduction, paying down $1 billion in long-term notes during Q3, bringing the adjusted debt-to-EBITDA ratio to 2.6x. The share repurchase program remains paused due to the merger, with cash generation focused on debt reduction and funding capital programs, while maintaining a 19-year streak of annual dividend increases.

    05

    Outlook and Agility

    While Q4 volumes are projected to be down 6% due to international intermodal weakness, the company expects to achieve its high single to low double-digit 3-year EPS CAGR. Management emphasized its agility in adjusting operations to market conditions without sacrificing service quality or resource buffers, ensuring competitiveness and continued value delivery.

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