UNION PACIFIC CORP (UNP)·Q2 2025 Earnings Summary

Executive Summary

• Q2 2025 delivered record freight revenue and operating income; adjusted EPS of $3.03 was above the Street, while total revenue was roughly in line given lower fuel surcharges and other revenue softness .
• EPS beat vs S&P Global consensus by $0.12; revenue was modestly below consensus by ~$0.01B; adjusted OR improved 230 bps YoY to 58.1%, signaling continued efficiency gains .
• Management reaffirmed 2025 outlook (pricing accretive to OR; EPS growth consistent with high-single to low-double digit CAGR target) and announced a 3% dividend increase for Q3 2025, with capital plan of $3.4B and 2025 buybacks of $4.0–$4.5B maintained .
• Operational KPIs reached or approached records (velocity +10%, train length ~9,689 ft, workforce productivity +9%); coal surged on favorable nat gas prices and LCRA contract win, offsetting intermodal headwinds .
• Potential stock catalyst: CEO disclosed advanced discussions with Norfolk Southern regarding a possible business combination; no further details provided and no Q&A on the topic .

What Went Well and What Went Wrong

What Went Well

• Record freight revenue and operating income with adjusted OR 58.1% (−230 bps YoY) driven by volume growth, core pricing, and productivity; “We are delivering on our strategy… safety, service, and operational excellence” — CEO Jim Vena .
• Operational execution: freight car velocity +10% to 221 miles/day; train length near 9,700 ft; workforce productivity +9% — “momentum… enabling growth” — EVP Ops Eric Gehringer .
• Segment strength: Bulk +10% revenue (coal +38% YoY; grain exports to Gulf/Mexico), Industrial +4% revenue on chemicals/metals; “price dollars net of inflation accretive to OR for the third consecutive quarter” — CFO Jennifer Hamann .

What Went Wrong

• Other revenue −16% YoY on lapping prior intermodal equipment sale and metro transfer; lower accessorial and subsidiary revenues weighed on the top line .
• Premium down 4% revenue as intermodal ARPC fell on mix and lower fuel surcharge; Automotive volumes declined on reduced OEM production .
• Management flagged challenging 2H intermodal comps and expects sequential volume declines through Q3; other income expected to look more like Q1 (lower than Q2) .

Financial Results

Headline Financials vs Prior Year and Prior Quarter

Consensus vs Actual (S&P Global)

Values retrieved from S&P Global.*

Segment Revenue Breakdown

KPIs and Operating Metrics

Non-GAAP Adjustments: Q2 included a $115M deferred tax benefit (+$0.19 EPS) and a $55M crew staffing agreement cost (−$0.07 EPS); adjusted EPS was $3.03 and adjusted OR was 58.1% .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• CEO: “We produced quarterly records in freight revenue and operating income… I’m confident our 58.1% adjusted operating ratio will be industry-leading.” .
• CFO: “For the third consecutive quarter, price dollars net of inflation were accretive to our operating ratio… adjusted EPS was $3.03.” .
• EVP Ops: “Freight car velocity improved 10%… train length set an all-time record… we will continue to leverage technology to be efficient.” .
• EVP M&S: “Intermodal volumes showed YoY growth, but premium ARPC declined; coal strength and grain exports drove bulk… we’re launching seven-day services and opened a new KC intermodal terminal.” .

Q&A Highlights

• Consolidation: CEO disclosed advanced discussions with Norfolk Southern; declined detailed commentary and Q&A on the topic, framing it as “what’s possible” for customers and network efficiency .
• OR trajectory: Management reiterated continuous improvement focus without setting specific targets; objective remains industry leadership in efficiency .
• Coal sustainability: Strength driven by nat gas prices and LCRA win; monitoring data center/cloud power demand potentially delaying retirements .
• Regulatory path: Positive momentum with FRA on technology adoption and safety improvements (crew composition, broader tech initiatives) .
• Intermodal/channel partners: Balancing IMCs and UP’s railbox offerings; expanding domestic services and new terminals to backfill international pressure .

Estimates Context

• Q2 2025 adjusted EPS of $3.03 beat S&P Global consensus of $2.91 by $0.12; total revenue of $6.15B modestly trailed consensus of $6.17B by ~$0.01B; EBITDA of $3.15B was slightly below consensus $3.18B. Price/mix and productivity offset fuel surcharge declines and other revenue softness .
  Values retrieved from S&P Global.*

• Implication: EPS estimates likely move higher on operating leverage and coal strength; intermodal headwinds and lower other income in Q3 could temper top-line and EBITDA forecasts .

Key Takeaways for Investors

• Operating momentum is durable: OR improved, service metrics at record levels; continued pricing discipline supports margin resilience despite mix .
• Mix tailwinds from Bulk (coal, grain) offset near-term Premium pressure; Industrial remains steady with chemicals/metals strength and Gulf Coast wins .
• Near-term caution: Q3 other income likely down vs Q2 and volume expected to decline sequentially on intermodal comps; watch cadence and service-led domestic intermodal backfill .
• Capital returns intact: 3% dividend hike to $1.38 per share and ongoing $4.0–$4.5B buybacks signal confidence in cash generation and balance sheet (Adj Debt/EBITDA at 2.8x) .
• Emerging optionality: Advanced discussions with NS could be transformational; near-term uncertainty but potential long-term network/service benefits if pursued .
• Tactical angle: Favor on strength into results and pullbacks tied to intermodal comp commentary; monitor coal/nat gas dynamics and new domestic intermodal launches as offsets .
• Medium-term thesis: Efficiency flywheel plus disciplined pricing and targeted growth investments (terminals/services) underpin EPS CAGR target reaffirmation .