Sign in

You're signed outSign in or to get full access.

UP

UNION PACIFIC CORP (UNP)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 results were broadly in line but slightly below consensus: revenue $6.027B (flat YoY), diluted EPS $2.70 (flat YoY), operating income $2.371B, operating ratio 60.7%; management highlighted a 90 bps OR headwind and ~$0.19 EPS headwind from fuel and leap year .
  • Volumes rose 7% with robust core pricing; freight revenue excluding fuel surcharges grew 4%, while mix and lower fuel surcharge revenue offset gains, keeping total operating revenue flat .
  • 2025 outlook affirmed: EPS growth consistent with achieving the 3-year CAGR target (high single to low double digit), pricing accretive to OR, capital plan $3.4B, share repurchases $4.0–$4.5B; CFO added other revenue run-rate guidance of ~$325M per quarter .
  • Near-term narrative drivers: intermodal/tariff volatility, coal demand strength tied to natural gas prices, and mix normalization; management emphasized agility and strong service/productivity as catalysts for margin improvement as fuel/mix headwinds moderate .

What Went Well and What Went Wrong

What Went Well

  • Record first-quarter operating performance metrics: freight car velocity 215 (+6%), workforce productivity 1,091 (+9%), and improved fuel consumption rate (1.107) supporting service reliability and operating leverage .
  • Strong volume (+7%) and core pricing (highest absolute quarterly level in 10 years), with pricing dollars net of inflation accretive to OR; management reiterated a disciplined pricing mindset tied to service quality .
  • Coal demand strength and agile operations enabled double-digit sequential coal set additions; business development wins (e.g., Hyundai Steel, Dow Poly 7) bolster medium-term volume pipeline .

Management quote: “Our strongest carload growth of the Class 1s… record first quarter operating performance… we are positioned to deliver.” – CEO Jim Vena .

What Went Wrong

  • Mix and lower fuel surcharge revenue created a 250 bps drag on freight revenue despite robust pricing; other revenue declined 19% YoY due to lapping one-time items and weaker subsidiary/accessorial revenue .
  • Intermodal average revenue per car fell 7% YoY amid increased international intermodal mix and lower fuel surcharges; segment mix diluted overall margins despite pricing strength .
  • Macro/tariff uncertainty and potential back-half intermodal headwinds elevate risk to volume trajectory; management refrained from issuing precise 2025 EPS targets beyond the affirmed CAGR framework .

Financial Results

MetricQ1 2024Q4 2024Q1 2025
Total Operating Revenue ($USD Billions)$6.031 $6.121 $6.027
Freight Revenue ($USD Billions)$5.616 $5.789 $5.691
Operating Income ($USD Billions)$2.372 $2.525 $2.371
Net Income ($USD Billions)$1.641 $1.762 $1.626
Diluted EPS ($)$2.69 $2.91 $2.70
Operating Ratio (%)60.7% 58.7% 60.7%
Effective Tax Rate (%)23.3% 22.8% 23.6%

Actual vs Consensus (Q1 2025):

MetricConsensus Q1 2025Actual Q1 2025
Revenue ($USD Billions)$6.074*$6.027
Diluted EPS ($)$2.731*$2.70
EBITDA ($USD Billions)$3.049*$2.994*

Values retrieved from S&P Global.*

Segment Freight Revenue ($USD Millions) – YoY Comparison:

SegmentQ1 2024Q1 2025
Bulk$1,817 $1,836
- Grain & Grain Products$943 $950
- Fertilizer$201 $210
- Food & Refrigerated$285 $260
- Coal & Renewables$388 $416
Industrial$2,104 $2,082
- Industrial Chemicals & Plastics$572 $607
- Metals & Minerals$515 $521
- Forest Products$338 $321
- Energy & Specialized Markets$679 $633
Premium$1,695 $1,773
- Automotive$611 $581
- Intermodal$1,084 $1,192
Total Freight Revenue$5,616 $5,691

KPIs – Operational and Service Metrics:

KPIQ1 2024Q1 2025
Freight Car Velocity (miles/day)203 215
Average Train Speed (mph)24.1 23.7
Average Terminal Dwell (hours)23.5 22.1
Locomotive Productivity (GTMs/HP-day)135 136
Workforce Productivity (car miles/employee)1,000 1,091
Intermodal SPI (%)95 94
Manifest SPI (%)87 93
Avg Fuel Price ($/gal)$2.81 $2.51
Fuel Consumption Rate1.115 1.107
Revenue Carloads (000s)1,967 2,097
Avg Revenue per Car ($)$2,855 $2,714

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
EPS Growth vs 3-yr CAGRFY 2025Consistent with high single to low double-digit CAGR Consistent with high single to low double-digit CAGR Maintained
Pricing vs InflationFY 2025Pricing dollars accretive to OR Pricing dollars accretive to OR Maintained
Operating Ratio/ROICFY 2025Industry-leading OR and ROIC Industry-leading OR and ROIC Maintained
Capital Plan ($)FY 2025$3.4B $3.4B Maintained
Share Repurchases ($)FY 2025$4.0–$4.5B $4.0–$4.5B Maintained
Other Revenue Run-Rate ($/qtr)FY 2025Not specified~$325M per quarter New
Comp per Employee (YoY)FY 2025+4% full-year (January outlook) +4% full-year Maintained
Dividend per ShareQ2 2025$1.34 (Q4 run-rate) $1.34 declared (payable Jun 30, 2025) Maintained

Earnings Call Themes & Trends

TopicQ3 2024 (Oct)Q4 2024 (Jan)Q1 2025 (Apr)Trend
Pricing DisciplinePricing and core gains drove OR improvement; freight revenue ex-fuel +5% Pricing accretive; strong service underpins price “Highest quarterly level in 10 years”; price accretive to OR Strengthening
Intermodal/TariffsInternational intermodal strong; noted fuel tailwind to OR Volume growth with efficiency; intermodal revenue +3% in Q4 Tariff volatility; expect international intermodal slowdown later in 2H; remain agile Cautious
Coal DemandCoal down YoY in 2024 Coal down FY; Q4 mixed Coal strong on nat gas pricing; sequential set additions Improving
Service/OperationsVelocity 210 (+5%); workforce productivity record OR 58.7%; record workforce productivity Velocity record; dwell -6%; workforce +9% Improving
Capital Returns2024 buybacks ~$1.5B 2025 plan $4.0–$4.5B; A-rated $1.7B repurchased in Q1; reaffirm $4.0–$4.5B Accelerating
Technology/ProcessEfficiency initiatives noted Continued optimization Energy mgmt systems; NetControl dispatch; adaptive planning Scaling

Management Commentary

  • “Operating ratio was 60.7%, flat… even with a 90 basis point headwind from fuel and leap year… record first quarter operating performance.” – CEO Jim Vena .
  • “Core pricing was very strong and reached the highest quarterly level in the past 10 years… pricing dollars net of inflation were accretive to our operating ratio.” – CFO Jennifer Hamann .
  • “We anticipate a slowdown in International Intermodal… decreased volume in the second half due to higher comparisons… remain optimistic about domestic intermodal growth via over-the-road conversions.” – EVP M&S Kenny Rocker .
  • “We always keep our buffer of resources… adaptive planning makes us faster at decisions… ability to adjust locomotives, cars, crews within hours.” – EVP Operations Eric Gehringer .

Q&A Highlights

  • Outlook/Guidance: Management reaffirmed the 3-year CAGR EPS framework amid macro/tariff uncertainty, citing strong April carloads and operational agility but avoiding precise FY EPS targets .
  • Margins/Mix: Mix and fuel headwinds uniquely pressured Q1 margins; management expects mix to moderate and potentially turn positive in 2H if intermodal normalizes; fuel should be a “nonevent” for the year if prices hold .
  • Pricing Sustainability: Strong service/investment enable disciplined pricing; only truck markets are unsupportive currently—if truck pricing improves, UP could see further pricing benefits .
  • Intermodal/Tariffs: Customers need more certainty; UP is proactively engaging and can re-optimize the transportation plan quickly (latent capacity, train combos) to maintain service and productivity .
  • Capital Returns: Repurchases of ~$1.7B in Q1; plan remains $4.0–$4.5B for FY 2025 but is a flexible lever if conditions change; liquidity supportive .

Estimates Context

  • Q1 2025 came in slightly below Street: EPS $2.70 vs $2.731* consensus, revenue $6.027B vs $6.074B* consensus; EBITDA $2.994B* vs $3.049B* consensus .
  • With mix and fuel identified as transitory drags and service metrics strong, estimate revisions should focus on moderating fuel “headwind” assumptions and a more cautious 2H intermodal trajectory; pricing accretion and operational productivity support margin stabilization .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Mix/fuel explained a modest miss; as fuel normalizes and mix improves, margins should expand off strong operational baselines (record velocity, dwell, workforce productivity) .
  • Management is firmly price-disciplined; with service performance high and investments ongoing, pricing remains accretive even as intermodal headwinds emerge .
  • Intermodal/tariff volatility is the main tactical risk; UP’s adaptive planning and resource buffer mitigate downside, while domestic conversions and business development provide offsetting growth channels .
  • Coal strength (nat gas-driven) and new wins in Bulk/Industrial (Hyundai Steel, Dow Poly 7) diversify volume risk and support 2H trajectory even if international intermodal softens .
  • Capital returns are tracking toward the $4.0–$4.5B plan; dividend maintained at $1.34, with balance sheet and A-ratings intact (Adj Debt/EBITDA 2.8x) .
  • Watch for 2Q seasonality and mix moderation to drive sequential OR improvement; management expects typical Q1→Q2 margin uplift and is “committed to improvement” regardless of volume .
  • Near-term trading: stock narrative tied to tariff headlines and intermodal flow shifts; medium-term thesis anchored in service-driven price accretion, productivity, and disciplined capital allocation .