Union Pacific Corporation Q3 FY2025 earnings call

• Core pricing gains and operational efficiencies drove strong financial results. Freight revenue excluding fuel grew for the sixth consecutive quarter and set a best-ever record. • Set best-ever quarterly records in workforce productivity, fuel consumption, terminal dwell, and train line. Adjusted operating ratio was 58.5%, a 180 basis point improvement vs last year. • Safety and service results improved. • Bulk segment was driven by strong coal demand, grain export strength, etc. • Industrial segment benefited from volume and average revenue per carload increase. • Premium segment had volume decrease but average revenue per car increase. • Operations team focused on safety, service, and efficiency with freight car velocity up 8%, locomotive productivity up 4%, workforce productivity up 6%, and train length up 2%.

Union Pacific reported 2025 third quarter operating revenue of $6.2 billion, up 3% versus last year. Freight revenue totaled $5.9 billion, up 3%. The bulk segment saw revenue up 7% with a 7% increase in volume. The Industrial segment had revenue up 3% on a 3% volume increase and 1% increase in average revenue per carload. Premium revenue declined 2% on a 5% volume decrease but 3% increase in average revenue per car. Other revenue declined 2% to $317 million. Operating expense increased 1% to $3.7 billion, and reported operating income grew 6% to $2.5 billion.

• Still expect to achieve 3-year EPS CAGR view of high single to low double-digit growth. • Reaffirm accretive pricing, industry-leading operating ratio, and return on invested capital. • Fourth quarter volumes running down 6% due to international intermodal tough comparison, but still expect to achieve 3-year EPS CAGR view.

• Merger approval process uncertainties including gaining shipper and union support. • Macro economic indicators like automotive sales and housing starts being softer than Investor Day targets impacting results. • Challenges in maintaining pricing and volume in a tough market environment.

Q: Thomas Wadewitz asked about the merger application process, support from shippers and unions, and timing of filing with STB.

A: Vincenzo Vena stated they have a strong service level foundation, are financially sound, in discussion with unions to formalize agreements, aiming to file with STB by end of November or early December.

Q: Ken Hoexter asked about fourth quarter puts and takes, volumes down, earnings expectations.

A: Jennifer Hamann said volumes are down 6% mostly due to international intermodal, but coal is strong, merger costs and productivity challenges create headwinds yet the railroad is running sound fundamentally.

Q: Brandon Oglenski asked about competitors collaborating more and impact on merger.

A: Vincenzo Vena said competitors reacting shows the merger provides enhanced competition, helping their position in front of STB.

Q: Jonathan Chappell asked about nimbleness and productivity with weaker volumes.

A: Eric Gehringer said they won't sacrifice buffers, will react to markets by adjusting transportation plan, locomotive, car, and hiring fleets.

Q: Scott Group asked about rail opposition to merger and pricing going forward.

A: Vincenzo Vena said other railroads reacting helps their case with STB, Jennifer Hamann said the pricing environment is challenging but the team is yielding positive price through service value.

Q: Brian Ossenbeck asked about intermodal share shift and chemical shippers' vocal support.

A: Kenny Rocker said they've seen market degradation but have investments in intermodal service product and direct customer approach, Vincenzo Vena said a 15%-20% speed/throughput increase comes from removing touch points.

Q: Stephanie Moore asked about implementing service best practices post-merger.

A: Eric Gehringer said there's the same focus on optimizing performance at a broader scale, working with the Norfolk Southern team.

Q: Jason Seidl asked about intermodal yield and ag RPU.

A: Jennifer Hamann said intermodal pricing is service-based, ag export is about length of haul, Kenny Rocker said they've transformed the intermodal network and have a flexible grain business.

Q: Christian Wetherbee asked about pricing environment next year.

A: Kenny Rocker said the strong service product leads pricing and customers are still looking for market clarity.

Q: David Vernon asked about enhanced collaboration and UMAX program.

A: Kenny Rocker said they're working with all rails and supporting UMAX as a viable product.

Q: Walter Spracklin asked about S4 document and guidance.

A: Jennifer Hamann said the S4 numbers are unstressed financials, not detailed guidance.

Q: Richa Harnain asked about EPS growth and pricing lever.

A: Jennifer Hamann said macro indicators are worse but UP is agile, executing on fundamentals, Vincenzo Vena said pricing is based on the strong service product.

Q: Bascome Majors asked about debt management for merger.

A: Jennifer Hamann said planning to pay down debt, working with bank groups, and structuring to pay down and repurchase shares later.

Q: Ariel Rosa asked about macro risks and merger synergy targets.

A: Vincenzo Vena, Jennifer Hamann, and Kenny Rocker said they're confident in the macro, control railroad fundamentals, and have a strong network and service product to capitalize on opportunities.

Q: Brady Lierz asked about business wins and 2026 volume growth.

A: Kenny Rocker said wins come from plant expansions, new facilities, a strong network and portfolio, and a strong pipeline for 2026.