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UNION PACIFIC CORP (UNP)·Q3 2025 Earnings Summary

Executive Summary

  • Adjusted EPS was $3.08, up 12% YoY; GAAP diluted EPS was $3.01. Operating revenue rose 3% to $6.244B, and adjusted operating ratio improved 180 bps to 58.5% (reported OR 59.2%) .
  • Results vs Street: EPS modestly beat consensus, while revenue was essentially in line/slightly below; mix was a headwind with international intermodal down and coal strength offsetting . See “Estimates Context” for details (S&P Global)*.
  • Operations were exceptional: record quarterly workforce productivity, fuel consumption rate, terminal dwell, and train length; freight car velocity reached 226 miles/day (+8% YoY) .
  • Outlook and capital allocation: Management reaffirmed 2025 Investor Day targets, increased the dividend 3% to $1.38, and paused buybacks due to the Norfolk Southern merger; Q4 volumes are currently running down ~6% (tough intermodal comp) .
  • Strategic catalyst: UNP aims to file the STB merger application by late November/early December; special shareholder meetings were held Nov 14 for proxy approvals .

What Went Well and What Went Wrong

What Went Well

  • “Our adjusted earnings per share of $3.08 increased 12% versus last year… adjusted operating ratio came in at 58.5%” — CFO Jennifer Hamann .
  • “Freight revenue, excluding fuel, grew 4% and set a best-ever quarterly record” — CMO Kenny Rocker .
  • “September marked our best-ever monthly performance at over 230 miles per day [freight car velocity]… record locomotive dwell of 14.9 hours” — COO Eric Gehringer .

What Went Wrong

  • International intermodal volumes fell 17% YoY, driving overall intermodal down 5% and pressuring Premium revenue (-2% YoY) .
  • Q4 setup: volumes currently down ~6%, with merger costs and paused buybacks creating a headwind vs last year’s record Q4, constraining sequential margin expansion .
  • Automotive faced reduced parts production and OEM quality holds; petroleum shipments remained challenged (energy & specialized markets revenue -3% YoY) .

Financial Results

Multi-period headline metrics

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Operating Revenue ($USD Billions)$6.091 $6.027 $6.154 $6.244
Diluted EPS ($)$2.75 $2.70 $3.15 $3.01
Adjusted Diluted EPS ($)——$3.03 $3.08
Operating Ratio (%)60.3% 60.7% 59.0% 59.2%
Operating Income ($USD Billions)$2.416 $2.371 $2.525 $2.549

Segment (commodity group) revenue progression

Commodity Group Revenue ($USD Millions)Q3 2024Q1 2025Q2 2025Q3 2025
Bulk$1,805 $1,836 $1,901 $1,930
Industrial$2,121 $2,082 $2,212 $2,194
Premium$1,842 $1,773 $1,730 $1,803

KPIs and service metrics (YoY)

KPIQ3 2024Q3 2025
Freight Car Velocity (daily miles/car)210 226
Average Train Speed (mph)23.3 24.2
Average Terminal Dwell (hours)22.4 20.4
Train Length (feet)9,580 9,801
Workforce Productivity (car miles/employee)1,102 1,165
Intermodal SPI (%)86 98
Manifest SPI (%)89 100

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Share Repurchases2025$4.0–$4.5B planned (Q2 outlook) Paused for Norfolk Southern merger Lowered/Paused
Dividend per ShareQ3 2025$1.34 (prior quarterly dividend run-rate) $1.38 (3% increase) Raised
Capital Plan (Capex)2025~$3.4B ~$3.4B Maintained
EPS Growth Framework3-year CAGRHigh-single to low-double-digit target affirmed Reaffirmed; on track with 2025 outlook Maintained
Pricing vs OR2025Pricing dollars accretive to OR Confirmed pricing accretive to OR Maintained
Q4 Volume OutlookQ4 2025Tough H2 intermodal comparison flagged in Q2 Volumes currently running ~-6% Lowered

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3 2025)Trend
Merger process (STB timeline, stakeholder support)Strategy affirmed; set Investor Day targets, capital plan, repurchase intentions .Plan to file STB application by late Nov/early Dec; ~400 customer support letters; union job guarantees discussed .Intensifying; clearer timeline/support
Intermodal dynamics (intl vs domestic)Q1: Intermodal demand supported record freight revenue . Q2: Intermodal up YoY; strong domestic, intl benefited from trade flow shift .Intl intermodal -17% YoY; domestic intermodal record volumes; tough Q4 comp .Intl challenged; domestic strong
Coal demand/mixQ2: Coal & renewables +38% YoY on nat gas economics .Coal +16% YoY in Q3; expected strength into Q4 (LCRA) .Strong
Pricing environmentCore pricing gains in Q1/Q2 .Yield ex-fuel +3.5%; pricing accretive to OR; truck-competitive markets remain challenging .Firm ex-fuel; truck pressure
Tariffs/macroQ2: Iron ore shipments impacted by tariff uncertainties .Macro soft spots (autos, housing); intermodal imports lower; automotive quality holds .Mixed; macro headwinds
Labor & buffersProductivity gains; lower employee levels; ratified pay raises and interim agreements (SMART-TD, BLET) .Maintain resource buffers (locos/crews/cars) even with lower volumes; nimble plan to right-size as needed .Disciplined
Mexico & petrochemQ2: strong petrochemicals; Q1: Mexico outlets via business development .Continued wins in petrochem; Mexico export wheat strength; infrastructure additions .Positive

Management Commentary

  • CEO: “Our third quarter results serve as a proof point that we are successfully executing on our strategy… adjusted EPS $3.08; adjusted OR 58.5%” .
  • CFO: “Operating revenue of $6.2 billion increased 3%… operating expense increased only 1%; adjusted OR 58.5%” .
  • CMO: “Domestic intermodal delivered record-breaking volumes… freight revenue ex fuel set a best-ever quarterly record” .
  • COO: “Best-ever monthly velocity over 230 miles/day; record locomotive dwell 14.9 hours; workforce productivity up 6%” .
  • CEO on timeline: “Hoping we can have [the STB application] in by the end of November or the latest early December” .

Q&A Highlights

  • Q4 setup: Volumes ~-6%; merger costs persist (lower than Q3); productivity will be challenged with lower volumes; unique $13M rent settlements were Q3-only .
  • Pricing outlook: Yield ex-fuel +3.5% in Q3; mix turns more favorable as intl intermodal recedes; truck markets remain tough; coal comps tough into early 2026 .
  • Intermodal share/margins: Domestic intermodal priced to reflect service/investments; record domestic revenue; portfolio additions (ramps/services) in key corridors .
  • Financing for merger: Planning facilities/interest-rate protection; debt paydown ahead of closing; aim to resume buybacks in year two post-close (~2028) .
  • Stakeholder support: ~400 customer letters; broad alliances maintained; optionality (UMAX) will be supported post-merger .

Estimates Context

MetricQ3 2025 ActualQ3 2025 ConsensusResult vs Estimate
EPS (Adjusted) ($)3.08 2.996*Bold Beat (≈+$0.08)*
Operating Revenue ($USD)6,244,000,000 6,250,431,060*Slight Miss (≈-$6M, ~0.1%)*
  • Commentary: EPS outperformance driven by core pricing and productivity; revenue essentially in line but modestly below as intl intermodal headwinds offset coal/industrial strength . Expect estimate revisions to reflect stronger price/mix and sustained operating efficiencies, tempered by Q4 volume softness .
  • Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Solid quarter: Adjusted EPS beat and OR improvement despite mixed volumes; service/productivity are at or near record levels — supports pricing power .
  • Mix shift: Intl intermodal weakness (-17% YoY) offsets coal strength; domestic intermodal remains a bright spot and strategically important .
  • Near-term setup: Q4 volumes tracking down ~6% with merger costs and paused buybacks — expect tougher sequential margin expansion vs a record Q4 comp .
  • Capital allocation: Dividend raised 3%; buybacks paused; capex ~$3.4B maintained — prioritizing balance sheet ahead of merger .
  • Strategic catalyst: STB filing targeted by late Nov/early Dec; substantial stakeholder support and union agreements reduce execution risk .
  • Pricing/margins: Ex-fuel yield +3.5% and accretive to OR; truck markets remain tough, but service levels should sustain price discipline .
  • Actionable: Favor medium-term margin trajectory on operating excellence and pricing; near term, watch intl intermodal trends, Q4 volume cadence, and STB timetable as stock movers .

Appendix: Additional Data Points

  • Income statement and freight revenue detail: see 8-K tables including operating income (+6% YoY to $2.549B), and commodity-level revenue/carloads/ARC .
  • Balance sheet & leverage: Adjusted debt/EBITDA 2.6x; total debt $31.8B TTM leverage improved (4.5x debt/net income) .
  • Cash flows: YTD CFO $7.065B; FCF $1.856B (non-GAAP) .
  • Labor agreements: Ratified agreements across 12 crafts; interim 3% raises for SMART-TD and BLET .

Bold Beat/Miss annotations in “Estimates Context” are based on S&P Global consensus values.*