Union Pacific Corporation Q2 FY2025 earnings call

• Safety and Performance: Safety progress with improvements in personal injury and derailment rates; freight car velocity improved 10%, train speed up 7%, terminal dwell reduced. Service performance improved with intermodal and manifest at 99% and 97% respectively. - Efficiency Metrics: Locomotive productivity up 5%, workforce productivity up 9% (all-time quarterly record), train length set an all-time record at nearly 9,700 feet. - Revenue Drivers: Freight revenue excluding fuel surcharge grew 6%, setting records; adjusted earnings per share up 12% excluding unusual items; operating ratio 58.1%, improving 230 basis points.

Bulk: Revenue up 10% vs last year, 11% volume increase; lower fuel surcharge and business mix led to slight decrease in average revenue per car. Coal strength due to natural gas pricing and LCRA shipments; grain export shipments offset domestic softness. Industrial: Revenue up 4% on 3% volume increase and 2% average revenue per carload increase; strong core pricing gains partially offset by business mix and lower fuel surcharges. Premium: Revenue down 4% on 1% volume increase and 4% decrease in average revenue per car, reflecting mix impact of international intermodal and lower fuel surcharges. Intermodal volumes grew, but automotive volumes down due to reduced OEM production.

• Expect third quarter other revenue in line with second quarter due to soft autos market and lower accessorials; other income like real estate gains lower. - Volume expected to moderate sequentially through the quarter but diverse franchise provides growth opportunities. - Reaffirm 3-year EPS CAGR view of high single to low double-digit growth, accretive pricing, industry-leading operating ratio, and ROIC.

• Potential impact of tariff implications on consumer behavior affecting automotive volumes. - Uncertainty in grain export risk due to policy-related factors. - Competition and market dynamics affecting various segments.

Q: About the potential business combination with Norfolk Southern and its impact on organic momentum A: Vena discussed the need to consider decisions in context and the company's focus on fundamental operations Q: Thoughts on reciprocal switching, open access, giving shippers more options A: Vena emphasized providing high-level service and that everything done is to win by offering better service Q: Shipper feedback on potential transcontinental railroad A: Vena stated negotiations are private and he won't get into details during ongoing discussions Q: Second half operational outlook and cost performance A: Eric, Kenny, and Jennifer discussed continued focus on safety, service, efficiency, and specific initiatives like new intermodal services Q: Shipper feedback on consolidation discussions A: Vena mentioned dealing with employees and focusing on labor agreements, but didn't elaborate on shipper feedback on consolidation specifically Q: Fleet refreshment and locomotive fleet intentions A: Gehringer discussed importance of locomotive fleet investments in modernization, overhaul, and modification programs Q: Operating ratio efficiency and guidance A: Hamann reaffirmed 3-year targets and confidence in hitting EPS goals; Vena emphasized focus on being most efficient railroad Q: Regulation progress on 0 to 0, 1-man crews and automation A: Gehringer stated momentum with FRA, progress on technologies for safer railroad Q: Market access and intermodal channel partners A: Rocker talked about using strong service product and interline alliances to open markets; Harnain asked about intermodal channel partners and Kenny responded on interline alliances and industrial development projects Q: Interchange process evolution and challenges A: Vena discussed simplifying product movement by reducing touch points and using technology for more fluid railroad Q: Premerger chats with STB regarding discussions with Norfolk Southern A: Vena stated they've given information and are in advanced discussions but wouldn't elaborate further on premerger chats with STB Q: Tariff impacts on business and balancing book of business A: Rocker talked about service product handling tariff impacts and positive signs in domestic movements like production redirection Q: Constraints and growth potential from structural network perspective A: Hamann and Rocker discussed customer-focused approach, nimble decision-making, delayered organization, and car supply/equipment supply improvements Q: Shipper requests for transcon railroad and customer conversations A: Vena stated customers ask about service, markets, and pricing, and the company focuses on winning with strong service Q: Impact of One Big Beautiful Bill on company opportunities and cash flow A: Hamann discussed primary impact of restoring 100% bonus appreciation, with incremental cash of $250 million to $300 million annually, and mentions of investment tax credit purchases and R&D credits