Union Pacific Q1 2025 Earnings Report

Union Pacific EPS Results

• Actual EPS: $2.70
• Consensus EPS: $2.73
• Beat/Miss: Missed by -$0.03
• One Year Ago EPS: $2.69

Union Pacific Revenue Results

• Actual Revenue: $6.03 billion
• Expected Revenue: $6.11 billion
• Beat/Miss: Missed by -$86.41 million
• YoY Revenue Growth: -0.10%

Union Pacific Announcement Details

• Quarter: Q1 2025
• Date: 4/24/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, April 24, 2025
• Conference Call Time: 8:45AM ET

Union Pacific (NYSE:UNP) is a leading transportation and logistics company based in Omaha, Nebraska. Founded in 1862, the company has a rich history of serving customers across North America with safe, reliable and efficient rail transportation solutions. Union Pacific operates in two business segments: Railroad and Premium Operations.

The Railroad segment comprises the company's core operations, including freight transportation and logistics services. The Premium Operations segment includes Union Pacific's subsidiary, Union Pacific Distribution Services, which provides transportation and logistics services to customers across multiple industries.

With over 32,000 miles of rail network across 23 states, Union Pacific connects major markets and communities across North America. The company is committed to sustainability and has set ambitious goals to reduce emissions and increase the use of alternative fuels.

Union Pacific has consistently performed in the transportation and logistics industry, delivering strong financial results over the past few years. It is also important to mention that Union Pacific's debt levels have been relatively stable over the past few years. For several years, the company has maintained a healthy cash position between 1 - 3 billion dollars. 

Union Pacific operates in the transportation and logistics industry, which is highly competitive and regulated. The industry has seen significant changes in recent years, including the growth of e-commerce and the increasing demand for sustainable transportation solutions.

Union Pacific faces competition from other railroads, trucking companies and intermodal transportation providers. The company also competes with alternative modes of transportation, such as air and sea freight. Regulatory and political issues, such as changes in trade policies and environmental regulations, can impact the industry and create challenges for Union Pacific.

Despite these challenges, Union Pacific has maintained its market position and continues to invest in technology and innovation to improve its services and meet the evolving needs of its customers.

Union Pacific's leadership team is led by Lance Fritz, who has been the company's Chairman, President and CEO since 2015. Fritz joined Union Pacific in 2000 and has held several leadership roles. The management team also includes other experienced executives who bring diverse skills and expertise to the company.

Union Pacific has several growth opportunities in the transportation and logistics industry. The company has invested in technology and innovation to improve its services and increase efficiency. For example, Union Pacific has implemented Precision Scheduled Railroading (PSR), a new operating model that has enhanced train speeds and reduced costs.

The company also has opportunities for growth in new markets and industries. Union Pacific's subsidiary, UPDS, provides transportation and logistics services to customers across multiple industries, including automotive, chemicals and agriculture. The company could expand its services into other sectors and markets to drive growth.

Union Pacific faces several risks and challenges in the transportation and logistics industry. Changes in consumer preferences and competitive pressures can impact the company's revenue and profitability. The shift towards e-commerce and the increasing demand for sustainable transportation solutions could also create challenges for Union Pacific.

Union Pacific also faces risks related to its operations and infrastructure. The company's rail network is subject to weather and natural disasters, which can disrupt operations and impact the company's financial performance. Union Pacific also faces cybersecurity and data privacy risks, which could impact the company's operations and reputation.

Union Pacific Q1 2025 Earnings Call Transcript

Key Takeaways

• Union Pacific reported Q1 EPS of $2.70 and net income of $1.6 billion with an operating ratio of 60.7%, flat year-over-year despite a 90 bp headwind from fuel and the leap year.
• The railroad delivered record first-quarter operating performance and achieved the strongest Class 1 carload growth at 7%, driven by close customer collaboration in a volatile environment.
• Freight revenue rose 1% (up 4% ex-fuel surcharges) with core pricing gains at a ten-year high and remaining accretive to the operating ratio, though offset by business mix and lower higher-arc volumes.
• Operating expenses were flat versus last year as productivity improvements—compensation and benefits per employee up 2%—combined with an 8% decline in fuel costs and 1% better fuel consumption to offset volume-related inflation.
• Management reaffirmed its 2025 targets—high-single to low-double digit EPS CAGR, industry-leading operating ratio, and $4–4.5 billion in share repurchases—while emphasizing agility amid tariff and economic uncertainties.

Presentation

[Operator]

Greetings. Welcome to the Union Pacific's First Quarter twenty twenty five Earnings Call. At this time, all participants are in listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference call is being recorded and the slides for today's presentation are available on Union Pacific's website.

[Operator]

At this time, it is now my pleasure to introduce your host, Mr. Jim Vena, Chief Executive Officer for Union Pacific. Mr. Vena, may now begin.

[Jim Vena, CEO at Union Pacific]

Good morning, Rob, and thank you. Good morning, and thank you for joining us today to discuss Union Pacific's first quarter results. I'm joined in Omaha by our Chief Financial Officer, Jennifer Hayman our Executive Vice President of Marketing and Sales, Kenny Rocker and our Executive Vice President of Operations, Eric Geringer. As you'll hear from the team, we had a solid start to the year. Our reported operating ratio was 60.7% flat compared to last year even with a 90 basis point headwind from fuel and leap year.

[Jim Vena, CEO at Union Pacific]

We delivered record first quarter operating performance. Further, we had the strongest carload growth of the Class 1s as we work closely with our customers to meet their needs in an uncertain environment. Now let's discuss first quarter results starting on slide three. This morning, Union Pacific reported twenty twenty five first quarter earnings per share of $2.7 which reflects a $0.19 or 7% headwind from fuel and leap year. Our reported twenty twenty five first quarter net income of $1,600,000,000 was essentially flat versus last year.

[Jim Vena, CEO at Union Pacific]

Reported first quarter twenty twenty five operating income was flat at 7% volume growth, robust core pricing gains and strong productivity were offset by business mix, fuel and the leap year. Freight revenue grew 1% versus last year. And if you exclude the impact from fuel surcharge, freight revenue increased 4% both first quarter records. Looking to the rest of 2025, we will continue to execute our strategy that emphasizes safety, service and operational excellence. Building on the strong foundation with our record first quarter operating performance, we are positioned to deliver.

[Jim Vena, CEO at Union Pacific]

I'll let the team walk you through the quarter in more detail and then come back and wrap it up before we go to Q and A. With that, Jennifer, first quarter financials.

[Jennifer Hamann, Executive VP & CFO at Union Pacific]

All right. Thanks, Jim, and good morning, everyone. I'll begin with a walk down of our first quarter income statement on slide five, where operating revenue of $6,000,000,000 matched last year's level even with lower quarterly fuel surcharge revenue, a reduction in other revenue and the leap year comparison. Freight revenue of $5,700,000,000 increased 1% despite the roughly $70,000,000 impact of having one less day in the quarter. Digging into the freight revenue drivers further, our strong volume growth in the quarter added six fifty basis points to freight revenue.

[Jennifer Hamann, Executive VP & CFO at Union Pacific]

Fuel surcharge revenue of $565,000,000 declined $100,000,000 as the impact of lower year over year fuel prices more than offset the higher volume, reducing freight revenue two seventy five basis points. Core pricing was very strong and reached the highest quarterly level in the past ten years. Further, pricing dollars net of inflation were accretive to our operating ratio. Despite these robust results, quarterly business mix combined with price for a two fifty basis point drag on freight revenue. In addition to volume growth and our lower average revenue per car business lines such as intermodal and coal, we had the additional dynamic of lower volumes in our higher arc businesses like petroleum, soda ash and finished vehicles.

[Jennifer Hamann, Executive VP & CFO at Union Pacific]

Wrapping up the top line, other revenue declined 19% to $336 Included in the year over year change are several items including some that we have discussed previously such as last year's intermodal equipment sale and the Metro transfer. Quarterly results were also challenged by reduced auto parts shipments at a subsidiary and lower accessorial revenue. And finally, you'll recall that first quarter twenty twenty four included a one time favorable contract settlement of $25,000,000 Switching to expenses, operating expense of $3,700,000,000 equalled last year as solid productivity gains and lower fuel costs offset volume related costs inflation and depreciation. Digging deeper into a few of the expense lines, compensation and benefits expense improved 1% versus last year as reduced workforce levels were partially offset by wage inflation. Record quarterly workforce productivity enabled us to limit first quarter cost per employee to only a 2% increase.

[Jennifer Hamann, Executive VP & CFO at Union Pacific]

First quarter fuel expense declined 8% on an 11% decrease in fuel prices from $2.81 to $2.51 per gallon. We also improved our fuel consumption rate 1% during the quarter as we continue to leverage optimization tools such as energy management systems on our locomotive fleet, enhancing train handling while reducing consumption. Purchased services and materials expense increased 3% versus last year, driven by inflation, volume related costs and a favorable 2024 item partially offset by lower costs at a subsidiary. Equipment and other rents increased 12% driven by increased car hire for automotive racks, inflation and demand in intermodal and other traffic that utilizes foreign freight cars. Finally, other expense increased 1% as higher costs associated with destroyed equipment were partially offset by lower bad debt expense and environmental remediation costs.

[Jennifer Hamann, Executive VP & CFO at Union Pacific]

First quarter operating income of $2,400,000,000 was consistent with last year. Below the line interest expense declined 1% on lower average debt levels partially offset by a slightly higher effective interest rate. First quarter twenty twenty five net income totaled $1,600,000,000 and earnings per share came in at $2.7 both essentially flat versus twenty twenty four despite the $0.19 EPS impact from fuel and leap year. Similarly, fuel and leap year had a 90 basis point unfavorable impact on our reported quarterly operating ratio of 60.7%. All in, the UP team produced a good quarterly performance and start to 2025.

[Jennifer Hamann, Executive VP & CFO at Union Pacific]

Before I go on, a couple of housekeeping items I want to mention. First is that we now estimate our other revenue will total about $325,000,000 per quarter reflecting our expectations for lower revenue. And a reminder that in the second quarter of twenty twenty four our results included a $46,000,000 benefit in other expense from the sale of intermodal equipment and we have now lapped that transaction. Turning to shareholder returns and the balance sheet on slide six. First quarter cash from operations totaled $2,200,000,000 up 4% versus last year.

[Jennifer Hamann, Executive VP & CFO at Union Pacific]

In February, we initiated an accelerated share repurchase program for $1,500,000,000 And through the quarter, we made open market purchases of an additional $220,000,000 as we more recently took advantage of very attractive share prices. That cash return plus our industry leading dividend payout enabled us to return $2,500,000,000 to our shareholders in the first quarter. In the quarter, our net debt increased $1,700,000,000 as we issued $2,000,000,000 of long term debt and paid maturities totaling $350,000,000 and this resulted in our adjusted debt to EBITDA ratio of 2.8 times at the end of the quarter as we continue to be A rated by our three credit rating agencies. Turning to the remainder of 2025 on slide seven. As we look to the next three quarters, it is likely going to be a bumpy ride.

[Jennifer Hamann, Executive VP & CFO at Union Pacific]

In preparation, we've worked through scenario planning and we'll remain agile. Importantly, we will continue executing our strategy and are maintaining the three year targets set at our Investor Day last September. In particular, 2025 EPS growth will be consistent with attaining our three year EPS CAGR view of high single to low double digit growth. Similarly, our views on accretive pricing, industry leading operating ratio and ROIC as well as capital deployment plans still hold. Obviously, there's uncertainty in the marketplace, but the year is off to a good start and we are delivering value for our shareholders.

[Jennifer Hamann, Executive VP & CFO at Union Pacific]

In fact, April volumes and service metrics were quite strong heading into the Easter weekend. Our focus on safety, service and operational excellence prepares us for whatever lies ahead and we're confident in our ability to perform. I'll now turn it over to Kenny to provide you an update on the business environment.

[Kenny Rocker, Executive VP of Marketing & Sales at Union Pacific]

Thank you, Jennifer, and good morning. Freight revenues totaled $5,700,000,000 for the quarter, which was up 4% excluding fuel surcharges due to increased volume. Despite unfavorable mix, we saw strong core pricing gains, which as Jennifer mentioned was the highest absolute quarterly level over the past ten years. This is a testament to our deliberate focus on maximizing price. Let's jump right in and talk about the key drivers for each of these business groups.

[Kenny Rocker, Executive VP of Marketing & Sales at Union Pacific]

Starting with our Bulk segment, revenue for the quarter was up 1% compared to last year on a 2% increase in volume and a 1% decrease in average revenue per car as business mix and lower fuel surcharge revenue was more than offset by core pricing gains and volume. Coal saw strong customer demand due to favorable natural gas pricing. Grain products volume was up for the quarter driven by increased demand for feedstocks. Locating new customers on our railroad ensures long term ratable demand and the newest facilities located in Nebraska and Kansas are now running at full capacity. Lastly, food and beverage volume declined in the quarter, primarily driven by consumer preference.

[Kenny Rocker, Executive VP of Marketing & Sales at Union Pacific]

Turning to Industrial, revenue was down 1% for the quarter on a 1% decrease in volume. Strong core pricing gains were offset by business mix, lower fuel surcharges and volume. Petroleum shipments decreased during the quarter due to business shifts, while soda ash was impacted by weaker global demand. This was partially offset by increased rock shipments driven by strong customer demand coupled with favorable weather conditions compared to last coupled Premium revenue for the quarter was up 5% on a 13% increase in volume and a 7% decrease in average revenue per car, reflecting the mix impact of increased intermodal shipments and lower fuel surcharges.

[Kenny Rocker, Executive VP of Marketing & Sales at Union Pacific]

Intermodal volumes remained strong based on international West Coast import demand. Additional positive domestic intermodal growth was further supported by business development efforts. Automotive volumes experienced a decline due to reduced OEM production. Turning to Slide 10, here is our 2025 outlook as we see it today for the key markets we serve. We've had a solid start to the second quarter with AAR carloadings currently up just over 7% compared to last year.

[Kenny Rocker, Executive VP of Marketing & Sales at Union Pacific]

Now, starting with bulk, continued challenges for food and beverage is expected primarily based on weakness in The U. S. Beer market. We anticipate coal volumes to remain strong in the near term. However, there is always volatility in natural gas prices, so we'll remain agile as we move into the second half of the year.

[Kenny Rocker, Executive VP of Marketing & Sales at Union Pacific]

Lastly, we expect grain exports into Mexico to remain strong. For grain products, our intense focus on business development results is expected to mitigate market uncertainties in renewable fuels and associated feedstocks. Moving to industrial, we anticipate petroleum volume to remain challenged due to business shift and our commitment to balance the volume at the right margin. Our industrial chemicals and plastics markets will remain favorable based on customer plant expansions and our ability to win incremental volume in the marketplace. For example, we are excited to support Dow's expansion later this year at their Poly seven facility in Freeport, Texas.

[Kenny Rocker, Executive VP of Marketing & Sales at Union Pacific]

And wrapping up with premium, while tariff uncertainty remains a concern for automotive, we are closely aligned with our customers providing guidance and solutions every step of the way. On the intermodal side, we anticipate a slowdown in international intermodal as we move through the second quarter and we expect decreased volume in the second half of the year due to the higher comparisons as customers diversify back to East Coast and Canadian ports. However, we remain optimistic about growth in domestic intermodal driven by our over the road conversions because of our strong service product and multiple channels to win. We are keeping a watchful eye on the market and potential tariff changes that could further impact overall consumer spending. While we navigate the trade policies and face difficult comparisons in the latter half of the year, our team has proactively taken action and hustling to overcome these obstacles.

[Kenny Rocker, Executive VP of Marketing & Sales at Union Pacific]

Specifically, earlier this month, we began moving volumes with Lower Colorado River Authority and will continue to ramp up throughout the month. The team's focus on business development is yielding positive results as we see incremental volume from new and expanding facilities across multiple segments like grain products and petrochemicals. In fact, we actively maintain an open pipeline of 200 construction projects, so business development through growth and expansion is always a priority. The team is also setting the stage for future growth. Hyundai Steel Corporation recently joined the Union Pacific Rail network announcing their first ever U.

[Kenny Rocker, Executive VP of Marketing & Sales at Union Pacific]

S. Steel mill in Louisiana. Construction won't be complete for a few years, but this is a positive result of our current business development efforts. With our strong service product, I am confident that we will continue business and take trucks off the road. And as I stated last quarter, our commercial team is crystal clear on acceptable pricing levels based on the service we've sold, which is driving strong core pricing gains.

[Kenny Rocker, Executive VP of Marketing & Sales at Union Pacific]

I'm proud of the team's ability to deliver a 4% increase in freight revenue excluding fuel. The team is focused and I'm very comfortable with our current position. And with that, I'll turn it over to Eric to review our operational performance.

[Eric Gehringer, Executive VP of Operations at Union Pacific]

Thank you, Kenny, and good morning. Moving to Slide 12. In the first quarter, we continued to see meaningful improvements across nearly all of our metrics. This is a testament to our strategy and our steadfast focus on providing industry leading safety, service and operational excellence. Starting with safety, which is the foundation of everything we do.

[Eric Gehringer, Executive VP of Operations at Union Pacific]

Both personal injury and derailment rates continue to improve versus their three year rolling average. In fact, we achieved a first quarter personal injury rate that tied a quarterly record dating back to 2016. Our number one priority remains returning all employees home safely each and every day. Freight car velocity, the best measure of fluidity on the railroad, improved 6% to two fifteen miles per day, a first quarter record. The primary driver was further reductions in terminal dwell, which improved 6% year over year and also set a new first quarter record.

[Eric Gehringer, Executive VP of Operations at Union Pacific]

We are turning our customers' assets faster, a win win, as we support their growth initiatives while simultaneously generating future growth capacity within our terminals. On the service front, manifest SPI was 93%, a six point improvement, while intermodal SPI at 94% was essentially flat. Our buffer of resources coupled with improved fluidity I mentioned earlier continues to translate into a very high level of service for our customers. And customers are seeing the benefit rewarding Union Pacific with new business. As Kenny mentioned, we have successfully onboarded our new coal customer while also adding incremental growth coal sets beyond what we had originally planned coming into the year.

[Eric Gehringer, Executive VP of Operations at Union Pacific]

On the intermodal front, we continue to handle historically high international intermodal volumes, all while delivering a service we sold our customers. Now let's review our key efficiency metrics on Slide 13. Throughout the quarter, the team was effective in our approach to asset management, leveraging our buffer of resources to inject assets only as we needed them. That approach paid off as you see improved efficiency metrics across the board. Locomotive productivity improved 1% compared to first quarter twenty twenty four.

[Eric Gehringer, Executive VP of Operations at Union Pacific]

Notably, our active locomotive fleet only increased 3% against the backdrop of a 7% volume growth and normal winter weather challenges we historically experienced this time of the year. While the increased fluidity of our network enabled the performance, we also see the continued benefits from our work on locomotive dwell. Workforce productivity, which includes all employees improved 9%. More specifically, our active train engine and yard workforce decreased 1%, demonstrating excellent operating leverage against the 7% volume growth. We will continue to support our training pipeline and provide the capacity buffer necessary to navigate an ever changing environment.

[Eric Gehringer, Executive VP of Operations at Union Pacific]

Train length in the quarter grew 2% compared to first quarter twenty twenty four. Further, we delivered improved train length sequentially despite lower intermodal volumes, which generally provide greater density to drive gains in train length. We will continue to leverage proprietary technologies like Precision Train Builder to safely grow train length while generating mainline capacity for current and future growth. Wrapping up, I'm very proud of the team and the results we delivered. We efficiently leveraged our resources to handle volume growth manner.

[Eric Gehringer, Executive VP of Operations at Union Pacific]

As we progress throughout the year, we will remain agile and in constant communication with our customers as they analyze their supply chain options. I'm very confident in our ability to control what we can control, whether it be our service product, buffer of resources, asset utilization, etcetera. We are prepared. And as we move forward, I'm certain you will see our resiliency on display. Jim?

[Jim Vena, CEO at Union Pacific]

Just caught me having a sip of coffee. You were way too fast closing that off, Eric. I thought you still had a couple of lines. Listen, thank you very much. And why don't we turn to slide 15.

[Jim Vena, CEO at Union Pacific]

Before we get to your questions, I'd like to quickly summarize what you've heard from our team. First, as you heard from Jennifer and Kenny, there are still a lot of unknowns related to volumes and the economy. But what I do know is that we are driving efficiency throughout our network and pricing for the strong value we provide our customers. Eric walked you through the records we are setting across safety, service and operational excellence. The network is fluid and we are meeting the demands of all our customers.

[Jim Vena, CEO at Union Pacific]

We are in a good position and we will be agile and responsive We remain committed to the long term guidance that we laid out at our Investor Day last September and we are confident we will be the industry leader as we drive value for our shareholders. We have the right strategy, right team and the right focus on the fundamentals, all supporting our ability to unlock the great value of the UP franchise. With that, we're now ready to take your questions. Rob?

[Operator]

Thank you, Mr. Vena. We'll now be conducting our question and answer session. Thank you. And our first question will be coming from the line of Chris Wetherbee with Wells Fargo.

[Operator]

Please proceed with your question.

[Jim Vena, CEO at Union Pacific]

Good morning, Chris.

[Chris Wetherbee, Senior Analyst at Wells Fargo]

Hey, thanks. Good morning, guys.

[Chris Wetherbee, Senior Analyst at Wells Fargo]

Good morning. I guess I wanted to talk a little bit about 2025 guidance. So obviously uncertainty is building here with concerns about maybe some slowing activity particularly on the West Coast. You guys have talked about sort of growth this year consistent with the long term targets. And I think that could kind of take a couple of different meanings.

[Chris Wetherbee, Senior Analyst at Wells Fargo]

So I was kind of curious if you wanted to maybe put a little bit of a finer point, kind of think about what the potential outcomes could be either from an earnings perspective, maybe from an operating ratio perspective. Just wanted to see if you can put some framework around what you think 25% might look like just given the uncertainty that's out there?

[Jim Vena, CEO at Union Pacific]

Well, Chris, that's a great question and a great way to start off. So at this point, there is a lot of things, tariffs, economy, what the consumer does, what interest rates are, what's going to happen with interest rates, what's going to happen with the tax package or the packages that the Congress is looking at doing. So all those things are up in the air. What we look at, at this point in time, we are very comfortable that we are standing by our guidance that we provided last year. Now is it a little muddier at this point than it was when we gave it last year?

[Jim Vena, CEO at Union Pacific]

Absolutely. But at this point, what we're seeing and that's why Jennifer mentioned, our carloads are pretty strong so far in April. And the mix is pretty strong. So we like what we see and we just don't want to get because everything is so fluid, we'd be remiss to start talking about what's going to happen as we move through the rest of the year. For us though, what we look at and it's very key.

[Jim Vena, CEO at Union Pacific]

Fundamentally, we have a railroad that's operating and we're able to be able to take a look at how we spend money on the railroad and what we're doing in a very efficient manner. And Eric took you through the details of how we're doing and how we're looking at things. And I think we've shown over the last few quarters and especially the first quarter what's possible with this railroad. If you come in with a fundamental railroad that's operating in a very well in a good manner, what happens is you can build from that. The reaction is what happens with all these items that I these vectors that I've talked about coming in at us.

[Jim Vena, CEO at Union Pacific]

At the end of the day, I'm comfortable. If we need to react, we will react. But at this point, I think it's so fluid. I woke up this morning to see when I woke up when I normally do. Went to bed last night at midnight after watching that bad hockey game that my team lost real bad.

[Jim Vena, CEO at Union Pacific]

And woke up this morning to see what the news was the latest. And at this point, it's a day to day, week to week reaction of what's happening marketplace. So that's why, Chris, we're sticking to our three year guidance. We think if everything comes to a normal, a much more normal situation, I think we will deliver that and we're very comfortable that we have the opportunity to do that. Jennifer, anything you want to add?

[Jennifer Hamann, Executive VP & CFO at Union Pacific]

No. I mean, I think you hit all the right points Jim. And we are looking at it a number of different ways both in terms of what we think is going to happen on the demand side. But obviously Eric and his team has to be prepared in terms of if demand does fall, what are the levers that we can pull. And so when we look at that in totality, we feel comfortable that we've got the right strategy.

[Jennifer Hamann, Executive VP & CFO at Union Pacific]

We're well positioned. And obviously, we want to take advantage of carloads when they're there. And I think we're doing

[Chris Wetherbee, Senior Analyst at Wells Fargo]

a really good job of that today. You very much. Appreciate it. Thank you. Our

[Operator]

next question comes from the line of Tom Wadewitz with UBS. Please proceed with your question.

[Jim Vena, CEO at Union Pacific]

Good morning.

[Tom Wadewitz, Senior Equity Research Analyst at UBS Group]

Yes, good morning. Yes, good morning. I

[Tom Wadewitz, Senior Equity Research Analyst at UBS Group]

guess this is a question along the same theme, which you'll probably get even more after mine. But when we think about your framework for this year and kind of volumes are strong in April, but there are a number of segments that there might be pre shipping or fall off. So I guess if you say in that kind of three year guide and call it high single digits earnings growth at the low end, Is there like a revenue growth or a volume growth assumption that you say, hey, we kind of need to be in this range in order to achieve that? And I guess, I don't know if that's a low single digits revenue growth. And then I guess just from a year over year perspective, if you're flat in earnings in 1Q, but you do full year high single digits, what's the lever that accelerates?

[Tom Wadewitz, Senior Equity Research Analyst at UBS Group]

Is it just easier comps? Is it kind of volume accelerates? Just I guess a couple more things of how we understand the frame. Thank you.

[Jim Vena, CEO at Union Pacific]

Well, Tom, it's an interesting question. You know there's a lot of puts and takes. If you take a look at our first quarter, the headline, you would say it was a flat year. But if you look at it underneath with the impact of fuel and what we had, we had a pretty good first quarter especially for a first quarter for Union Pacific that is one of our highest expense side with a lot of things that come in. Fundamentally, we are good.

[Jim Vena, CEO at Union Pacific]

We like the business mix that we have. We like the way the quarter has started off. I am absolutely not sure what's going to happen. And if anybody tells you at any point that they know what's going to happen over the next few weeks, let alone for the rest of the year completely. And I think we'd be remiss to start changing our guidance.

[Jim Vena, CEO at Union Pacific]

The easy thing would have been to come in this morning and just say, listen, there's so much noise. We're pulling our guidance. But we have a job to do and our job is to react to whatever is thrown at us. At Union Pacific, we've been doing that for a long time. And I do have nobody sees it, but I do have a few gray hairs.

[Jim Vena, CEO at Union Pacific]

So I have been around for a while and I have seen the ups and downs. I think I have never bet against The United States economy or The United States in general. So at the end of the day, I think we end up in a good place, whether that's in a few weeks or whether that's in six months. But fundamentally, if we can operate the way we are, Kenny and the team are building long term partnerships with customers and we have the franchise that we have that handles so many products that Americans use every day. I'm very comfortable, Tom, and we are not going to come off of our how we do it.

[Jim Vena, CEO at Union Pacific]

How do we deliver that high single digit, low double digit? Absolutely, it's how we price, volume, how efficient we are, everything that's in the mix that we can control. And I think we've shown over the last few quarters how whether we're doing a good job or not. I rate the team because I'm a hard marker. I'm like Walter a little bit.

[Jim Vena, CEO at Union Pacific]

We're average and I think there's more left for us to do. But I'm very comfortable of where we are right now.

[Tom Wadewitz, Senior Equity Research Analyst at UBS Group]

I guess any thoughts on like threshold revenue growth or volumes to get there or not?

[Jim Vena, CEO at Union Pacific]

Tom, first few weeks in April, we're saying listen we see a little bit of impact with everything that's going on. But at the end of the day, it's been pretty strong for us. Our industrial, our bulk, even the intermodal is pretty strong. But and I like to see the bulk in industrial where it is because as you know, it's a different margin business. But I really can't tell you.

[Jim Vena, CEO at Union Pacific]

And Tom maybe you have a better idea. Fill me in if you can because I can't tell what's going to happen here in the next couple of weeks. But I think at the end of it we'll see a reasonable position for The United States Of America when it comes and will not impact. The worst thing that can happen is it starts to impact what consumers are doing and their thought process and how they spend money. We haven't seen that at this point, but that would be a worry.

[Jim Vena, CEO at Union Pacific]

But at this point, we haven't seen it. Thanks, Tom.

[Tom Wadewitz, Senior Equity Research Analyst at UBS Group]

Thanks for the time.

[Operator]

Our next question is from the line of Fadi Chamoun with BMO Capital Markets. Please proceed with your question.

[Fadi Chamoun, Transportation Analyst at BMO Capital Markets]

Yes, good morning.

[Jim Vena, CEO at Union Pacific]

Good morning, Sadi.

[Fadi Chamoun, Transportation Analyst at BMO Capital Markets]

I have a quick question. Yes, good morning, Jim. So a quick question on the pricing. You mentioned the strongest in ten years for Q1. How much of that is reflecting maybe the lag impact from the inflation we saw in the last couple of years?

[Fadi Chamoun, Transportation Analyst at BMO Capital Markets]

And how much is driven by the better service performance of the network in the last year? If you can give some color about kind of what's underlying the strong pricing and how sustainable that is?

[Jennifer Hamann, Executive VP & CFO at Union Pacific]

Yes, Fadi. Thanks for that question. I'll start it off and then kick it over to Kenny. I do think it's important to recall back at our Investor Day where we laid out our vision that we were going to have accretive pricing going forward. And in that we talked about the fact that we had some catch up to do that we had the opportunity to touch more of our long term contracts and that that was part of what gave us the confidence that we were able to stand before you all in September and say that the pricing was going to be accretive.

[Jennifer Hamann, Executive VP & CFO at Union Pacific]

Certainly, Eric's service product helps support that when the team is going in and having those conversations. But this is consistent with what we were seeing and what we were expecting to see back in September. And we just believe there's more of that coming forward. So that's where you're seeing that confidence.

[Kenny Rocker, Executive VP of Marketing & Sales at Union Pacific]

Yes. So you look at it, as Jennifer mentioned last year, we were price accretive. We're starting off price accretive today. And it's really that we have as a commercial team. Eric is and his team is providing us with a strong service product.

[Kenny Rocker, Executive VP of Marketing & Sales at Union Pacific]

We also have quite a few investments that we're making into the network. That gives us all the ability to really price to the service that we're sold and we're pretty dogged on that. And so that's what you're seeing. You're seeing the results of that play out.

[Fadi Chamoun, Transportation Analyst at BMO Capital Markets]

Thank you.

[Operator]

Thanks, Patti. Next question is from the line of Brandon Oglenski with Barclays. Please proceed with your question.

[Brandon Oglenski, Director & Senior Equity Analyst at Barclays]

Hi, good morning. Thanks for taking the question. Kenny, I know everything is volatile right now, but obviously we have pretty sizable tariffs on Chinese goods here. I mean, I think our Treasury Secretary is calling it a de facto embargo on trade with China. And we can see that there are going to be some higher blank sailings into like LA Long Beach, which has been a pretty big source of volume for you guys.

[Brandon Oglenski, Director & Senior Equity Analyst at Barclays]

So I guess maybe a two part question. A, have you heard from your international customers or any of your customers about plans for dealing with these very large tariffs? And then maybe just quickly for Eric, like how would you deal with potentially a big air pocket in demand on certain parts of your network even if you're seeing growth domestically? Thank you.

[Kenny Rocker, Executive VP of Marketing & Sales at Union Pacific]

Brandon. Thanks for the question. So first of all, it starts with staying close to the customers. I've been talking to customers this week. It stays staying close with Eric, and it's all about the agility.

[Kenny Rocker, Executive VP of Marketing & Sales at Union Pacific]

We've shown improved that in the quarter. We were able to handle that business. You're asking a specific question about China. And yes, we do see, and Jim used the word normal patterns, we expect as we move throughout the quarter to see a little bit more softness and then we have some tougher comps. The best thing we can do during that time is just have all the products that we have with the ramp, the match back and the service product and stay close to our customers because we've been seeing these supply chain patterns change at the drop of a hat.

[Eric Gehringer, Executive VP of Operations at Union Pacific]

And Brandon, related to how we continue to maintain volume variable plus, for us, we're very prompt to being able to do that. When we think about what are we physically doing, what does it look like on the railroad, it's really your five critical resources with emphasis mostly on three of them. You adjust the amount of locomotives you have, the amount of cars you have and you adjust the amount of crews that you have. Now you do that inside of our transportation plan, which over the last year, we've got a big plus that we've added to that with a tool that we have that's called adaptive planning. That's taken our playbooks and made us even faster at how we're able to make those decisions.

[Eric Gehringer, Executive VP of Operations at Union Pacific]

What used to take multiple days or weeks, now we can do in a matter of hours or even up to maybe at most a couple of days. So we have the ability to adjust. You've seen us demonstrate that many times over our history and that's exactly what we'll do.

[Brandon Oglenski, Director & Senior Equity Analyst at Barclays]

Thank you.

[Operator]

Our next question is from the line of Scott Group with Wolfe Research. Please proceed with your question.

[Jim Vena, CEO at Union Pacific]

Good morning, Scott.

[Scott Group, MD & Senior Analyst at Wolfe Research]

Hey, thanks. Good morning, guys. So if I take a step back and we have the best pricing in ten years and volumes up seven and headcounts down three, I would have thought it could have been like the perfect storm of like record kind of margin improvement, when you just think about those three things and margins are flat. Is this just mix in fuel? And so what does this look like going forward, maybe if the volume slows, but maybe now the mix turns positive, hopefully, fuel headwind isn't the same magnitude.

[Scott Group, MD & Senior Analyst at Wolfe Research]

Should we start to see a lot more margin improvement just given this price, as we get through maybe some of this mix headwind?

[Jim Vena, CEO at Union Pacific]

It's an interesting way to look at it is that we have you're saying if we have less revenue but the mix is better, we end up with better margins. I look at it a little bit different. Yes, that's a win. But I'd rather have more revenue and drive to make sure that the margin is in the right place. We like all the business that we have.

[Jim Vena, CEO at Union Pacific]

And the reason we are Union Pacific is because of the top 100 customers that we have that we move everything that people use every day in either the manufacturing or at the end. So Scott, yes, could say that if intermodal came down because of what's happening at the West Coast or the imports that would help us margin wise. But for me, I'd rather remember, we don't give OR specifics on purpose. If somebody would tell me that I could be a 55 operating ratio railroad and our revenue went down by X, I'd rather be a 57 operating ratio railroad with our revenue going up by X. So that's the way I look at it.

[Jim Vena, CEO at Union Pacific]

Jennifer, anything else you want to add?

[Jennifer Hamann, Executive VP & CFO at Union Pacific]

Yes. I just would on the mix part, I obviously mix price together and mix with record price together being down two fifty basis points, that gives you an indication of the impact of mix to the quarter. And we also gave you what the impact was to the OR and EPS from fuel. So to your point, as we look ahead, mix should moderate. I don't know when it will turn positive, but probably should turn positive as we move into the back half of the year.

[Jennifer Hamann, Executive VP & CFO at Union Pacific]

We'll see how second quarter plays out. As Jim talked earlier, there's just a lot of wildcards on how that's going to play, but should improve nevertheless. You look at fuel, we see that as something that moderates through the year as well. And when we get to the end of the year, fuel prices stay kind of where they're at, I think you look back and you say fuel was kind of a nonevent for us overall for the year. So I think you're looking at it right.

[Jennifer Hamann, Executive VP & CFO at Union Pacific]

The only thing I would say is don't underestimate the mix impact to our margins in the first quarter.

[Operator]

Thanks Scott. The next question is from the line of Ken Hoexter with Bank of America. Please proceed with your question.

[Jim Vena, CEO at Union Pacific]

Good morning, Ken.

[Ken Hoexter, Managing Director at Bank of America]

Hey, great. Good morning. So, Jen, maybe just taking that to another step and I know you don't give specific guidance, but if I think about maybe just historical averages, right, so first quarter to second quarter, maybe you could talk about what kind of level improvement you've historically seen. I think it's been about 100 basis points. So I just want to understand just to get to the EPS target that you're talking about.

[Ken Hoexter, Managing Director at Bank of America]

Do we have to see outsized seasonal performance given, I don't know whether it's the leap day and fuel impact you were talking about? Maybe I'll start with that. Thanks.

[Jim Vena, CEO at Union Pacific]

Well, Ken, I love the question. You know that you were you asked me because you thought for sure Jennifer would say I don't give any guidance. But yes, we're historically we're going to historically see that improvement. At this point, we see it already with three weeks in the books that we look like we'll have that historical change that happens normally first quarter to second quarter and maybe even a little bit better because of how well we're operating. But still too early in the quarter to say anything specific about what it looks like.

[Jim Vena, CEO at Union Pacific]

Jennifer?

[Jennifer Hamann, Executive VP & CFO at Union Pacific]

Yes. No, I mean the first quarter is where you typically have your worst margins for the year and it typically improves second and third quarter because you've got kind of your beginning of the year cost out of the way. You see your volume improve and you're away from the winter weather. And so you've got that kind of mud behind you if you will in the first quarter that helps propel you in the second and third quarter as you see volume growth. Obviously, as we're talking today, volume is going to be the wildcard, but we're not going to use that as an excuse to not improve.

[Jennifer Hamann, Executive VP & CFO at Union Pacific]

In fact, we believe we will improve. And that's the task that the team has and we're absolutely committed to it.

[Ken Hoexter, Managing Director at Bank of America]

Wonderful. And Jim, you mentioned your team lost bad. Was that the Oilers Canadians? Or are you really an Ottawa fan?

[Jim Vena, CEO at Union Pacific]

Well, I am an Edmonton Oilers fan. That was ugly. My dad is a Montreal Canadians fan. He didn't like that. So there wasn't a lot of positive.

[Jim Vena, CEO at Union Pacific]

I went to bed last night after midnight going, what the heck is this, okay? Now I normally go to bed at midnight anyway and I had to laugh. I know this is a serious call, not a call about the NHL or NBA, but I think Kenny goes to bed at nine and Eric goes at 08:30. So when I told him I would stay enough till midnight to watch the game like I normally do, I think that just threw them right off. Jennifer said that's Vena.

[Jim Vena, CEO at Union Pacific]

He only needs five hours sleep. So he's good. But yes, rough day Ken, rough day let me tell Sorry

[Ken Hoexter, Managing Director at Bank of America]

to divert. Thank you guys. Thank

[Operator]

you. Our next question is from the line of Brian Ossenbeck with JPMorgan.

[Brian Ossenbeck, MD - Senior Analyst, Transportation at JP Morgan]

I'll get us back on track with something much more boring in this question. I don't know if you appreciate, let me ask it first. So maybe for Kenny, just the I know there's a lot of volatility with policies, but it does seem like there will be something on the Section three zero one related to China shipbuilding and now they're talking about removing the harbor maintenance tax benefit from the Canadian ports. So wanted to see what your initial thoughts are on that since we've been through two iterations of that with The U. S.

[Brian Ossenbeck, MD - Senior Analyst, Transportation at JP Morgan]

TR. And then the past trade war, we saw a big impact in general for The U. S. Export grain, particularly soybeans. So I wanted to see if that's something that we should also be considering here.

[Brian Ossenbeck, MD - Senior Analyst, Transportation at JP Morgan]

Thanks.

[Kenny Rocker, Executive VP of Marketing & Sales at Union Pacific]

Yes. Thanks for that, Brian. So first of all, we've talked with quite a few customers. And I'll tell you that they need a little bit more clarity and certainty. Candidly, we've seen the tariffs come on.

[Kenny Rocker, Executive VP of Marketing & Sales at Union Pacific]

We've seen them come off. We need a little bit more certainty. They need a little bit more certainty before they are going commit to making any significant changes in ports or traffic flows. I'd be remiss to say our commercial team is pretty intense or having pretty intense conversations about coming to The U. S, especially with our network that we have, especially with the service.

[Kenny Rocker, Executive VP of Marketing & Sales at Union Pacific]

So that's a focus for us. But bottom line, we got to make sure that these stick. The second part of your question on the grain piece, when you look back the first time Trump was in, we did see some of the traffic flows change, and we're seeing that as a positive today. Eric and the team have really done a great job of moving grain to areas like The Gulf and areas like Mexico. So yes, the traffic flows may change, but we still are able to have an agile network.

[Kenny Rocker, Executive VP of Marketing & Sales at Union Pacific]

The last part of that is just the, what I'll call, fundamental growth in terms of the fuel side. So the biofuels, renewable fuels, we still see that as a positive. We've been very aggressive hyper aggressive about landing new customers, landing new origins, landing new destinations. We still think that that's a good emerging market that's going to be in place.

[Brian Ossenbeck, MD - Senior Analyst, Transportation at JP Morgan]

You very much, All Thank you, Kenny.

[Operator]

Next question is from the line of Jonathan Chappell with Evercore ISI. Please proceed with

[Chris Wetherbee, Senior Analyst at Wells Fargo]

your question.

[Jim Vena, CEO at Union Pacific]

Morning, Jonathan.

[Jonathan Chappell, Senior Managing Director at Evercore ISI]

Good morning, Jim. Eric, question for you. You covered it a little bit, but I don't think we know exactly what the outcome is going to be. But I think with the blank sailings and some of the other comments around exports leaving China and what's going to come into the West Coast, Kenny already mentioned international intermodal probably has some challenges in the back half of the year, but domestic seems to be set up pretty well. So how do you kind of manage resources for, that volatility kind of within the intermodal segment?

[Jonathan Chappell, Senior Managing Director at Evercore ISI]

Do you keep a level of resiliency in case things are kind of short lived and kind of just focus on service and making sure you're prepared for the upturn? Or do you have to become a little bit more, I guess, drastic with some of the resource decisions that you make in the short term?

[Eric Gehringer, Executive VP of Operations at Union Pacific]

That's a great question, Jonathan, and a timely one. Let's make sure we're really clear about something. We always keep our buffer of resources, right? We always maintain the railcars, the locomotives and the crews that we need to operate to deliver the service product that we sold our customers. Now let's talk a little bit more lower in the weeds about how we do that on the railroad.

[Eric Gehringer, Executive VP of Operations at Union Pacific]

And we can just start with really practical things, but they're really important things. So with the increase in international intermodal, we've obviously made changes to our transportation plan. Now you might think that that's just where we just add trains to the system. That's not what we do. We first look at how do we fill any latent capacity we have on existing trains.

[Eric Gehringer, Executive VP of Operations at Union Pacific]

Then we look to say how do we combo certain trains to be able to generate more capacity. And as a last resort, we add new symbols that being new trains that we run. So when you're thinking about any type of reduction that may occur, you just work that in reverse, right? You first look at were there any trains that we added to the entire system that the volume just doesn't support running anymore. Then from there, you look and say, can I still combo with other trains so that we can continue to be productive and be volume variable plus?

[Eric Gehringer, Executive VP of Operations at Union Pacific]

That's It's literally how we do it every single month when we look through our transportation plan and make adjustments to it. It's sounding like I'm oversimplifying. It's a complex thing, and that's why we use so much technology to inform our decision making so that we can still deliver our service product, but do it in the most efficient manner.

[Jim Vena, CEO at Union Pacific]

Thank you very much.

[Jonathan Chappell, Senior Managing Director at Evercore ISI]

Great. Very insightful. Thanks, Eric.

[Operator]

The next question is from the line of Stephanie Moore with Jefferies. Please proceed with your question.

[Jim Vena, CEO at Union Pacific]

Good morning, Stephanie.

[Joseph Hafling, VP - Equity Research at Jefferies Financial Group]

Hi. Good morning, everyone. This is Joe Haffling on for Stephanie. Eric, thanks for walking through that. That was very helpful and I think helped answer a lot of those questions.

[Joseph Hafling, VP - Equity Research at Jefferies Financial Group]

I guess I maybe wanted to talk about something a little bit different. Under the surface, all the productivity initiatives you guys have been embarking on, as we think about 2025, what major projects do you guys have kind of under your barrel that you're working on that we should be looking forward to? And maybe just an obligatory, how we should think about headcount throughout the year? Thanks.

[Eric Gehringer, Executive VP of Operations at Union Pacific]

Sure. So taking on your productivity question first. As we think about projects, right, you kind of naturally want to trend towards talking about technology. Let's never forget though, the biggest driver of our productivity is the fundamentals and how we operate this railroad day in and day out. You saw that in the first quarter, right?

[Eric Gehringer, Executive VP of Operations at Union Pacific]

7% volume handled, that being 7% higher volume handled and our operating expenses were actually down 2% excluding fuel. You saw that in the record train length, record workforce productivity, etcetera. So you always want to stay most focused on your fundamentals. Now from a projectinitiative place, now you really are getting into the technology. That's technology, as Jennifer mentioned, on the fuel conservation side with energy management system.

[Eric Gehringer, Executive VP of Operations at Union Pacific]

It's how we think about MobileNx inside of our terminals as we work to automate portions of the terminals. It's even the work that our engineering team is doing on how do you automate the distribution of materials. In total, we only have dozens and dozens of these initiatives in different phases. So we're in a great position to continue to build on that. Now as far as the hiring side, as we've discussed before, every single month we go through our hiring plan.

[Eric Gehringer, Executive VP of Operations at Union Pacific]

And when we do that, we're looking to consider all of the different variables that we have to take into account, right? So those are things like attrition. Then to your question, the positive impact we get from productivity, changes in markets and the list goes on and on. We've already made adjustments this year to our hiring plan based on the changes in different markets and we'll continue to do that. Joe, we're committed to make sure that as we look at our asset base, we continue to become continue to be volume variable plus.

[Jim Vena, CEO at Union Pacific]

Eric, the only thing I could add is, and I think you did a great job of describing it. You make it sound easy but it's very complex. But at the end of the day, the way we look at it and the nice part about where we are right now is with us implementing net control and new dispatch system that allows us to dispatch at the highest highest level and react to things as they are moving on. Our new net control will allow us to actually react at a real fast manner. It's all about touch points for the cars.

[Jim Vena, CEO at Union Pacific]

If we can touch the railcars less to get them from origin to destination. We are not a linear railroad. We are very complex. When you come out of the LA Basin, we have intermodal containers both domestic and international going to across this network of ours plus going east into the eastern part with our partners East Of The Mississippi. So the way we look at it is, is how can we use the technology that we have developed and the fundamental technology to be able to make decisions so we remove touch points.

[Jim Vena, CEO at Union Pacific]

If we can remove touch points then we end up with a more efficient railroad and quicker and react to whatever is thrown at us. The nice part is, we're hiring. We still have to hire and Eric and the team did a great job when he talked about the headcount that we have in operations versus with the business that was increased, we were actually down. And we want to continue to be able to be as neutral as we can. And the first action we take always is we stop hiring or we slow down hiring if we need to, if we see there is something changing.

[Jim Vena, CEO at Union Pacific]

And we take full realization that when we make a decision to hire this is not a one day they show up and they're on the railroad as a conductor or as an engineering person or as a mechanical person or whatever. Listen, at headquarters we miss somebody one day, it's not that big of a deal. Somebody else will work an extra hour and we'll fill that in. But when it comes out in the field, you need those locomotive engineers, conductors. So we make sure that we're very careful.

[Jim Vena, CEO at Union Pacific]

But because we were hiring, we adjust adjust that down if we see things happen over the next few weeks on what we are going to do. But we are hiring now for three months down the road, three, four months down the road. So we have already started to slow that down just because we have become more efficient and then we will take a look at it as we go ahead. Sorry for the long answer, but I love operations so I had to get in the middle of that. Sorry, Eric.

[Joseph Hafling, VP - Equity Research at Jefferies Financial Group]

That was

[Joseph Hafling, VP - Equity Research at Jefferies Financial Group]

all very helpful. Thank you.

[Jim Vena, CEO at Union Pacific]

Thank you. Thanks for the question.

[Operator]

Our next question is from the line of Jordan Alliger with Goldman Sachs. Please proceed with your question.

[Jim Vena, CEO at Union Pacific]

Good morning, Jordan.

[Andrzej Tomczyk, Vice President at Goldman Sachs]

Good morning, everyone. Thanks for taking the time today. This is Andre on for Jordan. My question is somewhat conceptual trying to frame the downside risk to freight markets that might be left out there in the respect that most of transportation has already been in a freight recession for three years now. How much additional absolute downside risk is there left to volumes or yields if in a worst case we fall into a consumer led GDP recession?

[Andrzej Tomczyk, Vice President at Goldman Sachs]

Would a downturn be less pronounced in freight versus historical GDP slowdowns given the already extended slowdown in freight that occurred post COVID? Or would that be fair to say for some of your nonconsumer facing businesses?

[Jennifer Hamann, Executive VP & CFO at Union Pacific]

Yes. So I'll take a stab at that one. I mean I do think your point making some good points in terms of particularly when you think about the truck competitive part of our business which we've been all talking about the fact that it's been in a down mode, maybe recessionary mode, the last couple of years, and we've just been bouncing along the bottom there. Over that time, we've made tremendous strides to improve our service. We've filled out our stable of IMC partners.

[Jennifer Hamann, Executive VP & CFO at Union Pacific]

And so we do think we're extremely well positioned to be able to capture business that's out there. And when I think about the UP franchise, one of the best things about our franchise is the diversity. And so with that broad diversity, that broad scope, our reach across a number of markets, we have historically felt that that insulates us a little bit from what happens in one market versus the other. And you've seen that. I mean, you've got things last year, our volumes were up 3% when our coal was down 20%.

[Jennifer Hamann, Executive VP & CFO at Union Pacific]

Now this year, we have coal up and you've got other markets that are down. So we'll deal with whatever markets give us, whether it's a softer landing maybe for us just because of what's happened in the transportation space, the truck space the last few years or not. I think that still remains to be seen. I think the good news is we're agile, we're ready and we'll respond. And with the work that Kenny and team have been doing in business development, the service product that Eric's team is providing them, I think we'll capture our share in more and we'll perform very well.

[Andrzej Tomczyk, Vice President at Goldman Sachs]

Thanks. Appreciate the thoughts.

[Operator]

Thank you. The next question is from the line of Daniel Imbro with Stephens. Please proceed with your question.

[Jim Vena, CEO at Union Pacific]

Good morning.

[Daniel Imbro, Managing Director at Stephens Inc]

Hey, good morning guys. Thanks for taking the question. Kenny, want to follow-up on the intermodal maybe volume and kind of revenue per carload outlook. I think you mentioned there's some international headwinds coming, but the potential for more domestic strength from truckload conversions. I guess how did those domestic conversions trend through the first quarter as the truck market began to soften?

[Daniel Imbro, Managing Director at Stephens Inc]

And then related to that, I guess with the favorable mix of more domestic versus international, but maybe a softer truck pricing environment, how are you expecting to see intermodal revenue per carload through the back half of the year, just as the way those puts and takes?

[Kenny Rocker, Executive VP of Marketing & Sales at Union Pacific]

Yes. So I'll just start off by just updating you on where we are through bid season and call it a little bit more than a third going through the bid season. We're encouraged on where we are from a bid perspective. We're encouraged by the wins that are out there. Again, you hear me talk about the channels, the stable of private asset customers along with our own private box.

[Kenny Rocker, Executive VP of Marketing & Sales at Union Pacific]

Box. We've seen wins in those sections. The over the road section part of our business is the one that we're most focused on. A strong service product will help you with that. We talked about 6,000 loads with Uber that we won.

[Kenny Rocker, Executive VP of Marketing & Sales at Union Pacific]

That's all over the road. So that's how we're approaching that. From a price perspective, we have mechanisms in place to go out there and price with all of our customers. Again, with our rail asset, we're also able to compete in that marketplace. We've been in a lull, as Jennifer mentioned on our previous question, for a while.

[Kenny Rocker, Executive VP of Marketing & Sales at Union Pacific]

That has allowed us to go out there and win and compete business during a challenging environment. As the market or if the market does improve, we expect to move in a more positive direction on the revenue per car side.

[Jennifer Hamann, Executive VP & CFO at Union Pacific]

Yes. And the only thing I'll add there is if you think about, which we talk about mix within mix. So within intermodal, are different mixes. We talked back in September that international intermodal is our lowest average revenue per car. And so if you see less international intermodal, more domestic, that can be positive within that mix on mix space.

[Jennifer Hamann, Executive VP & CFO at Union Pacific]

So another thing to take into consideration.

[Jim Vena, CEO at Union Pacific]

Great. Thanks for the The

[Operator]

next question is from the line of Ari Rosa with Citigroup. Please proceed with your question.

[Jim Vena, CEO at Union Pacific]

Good morning, Ari.

[Ari Rosa, Senior Analyst at Citigroup]

Yes. Hey, good morning. So I just wanted to ask a clarifying question. When you talk about EPS growth consistent with attaining the three year CAGR on EPS, Just help me understand, that is not specifically a target for 2025 to be up high single digits to low double digits. Just wanted to clarify that point.

[Ari Rosa, Senior Analyst at Citigroup]

And then we've seen some strength in coal in second quarter to date. Just wanted to help understand what's underlying that strength and the extent to which you think it's sustainable? Thanks.

[Jim Vena, CEO at Union Pacific]

All right. I wish I could come here and tell you that what we see is a high single digit, low double digit for sure this year. There's just too many variables that we can't control going on right now. But we're very comfortable with the way the railroad is operating and that we continue, we're standing by our guidance. That's the way I look at it.

[Kenny Rocker, Executive VP of Marketing & Sales at Union Pacific]

Just on the natural gas, it's really the driver there when you look at our coal business. But the other part of that is being able to capture that business. And Eric and the team have done a great job of being agile, getting the resources in place. We actually saw double digit strength inside the quarter. So sequentially from February to March, we were able to capture that business.

[Kenny Rocker, Executive VP of Marketing & Sales at Union Pacific]

Year over year, you're talking sets that were added over 25%. So great job there. I'm excited because you look at the natural gas part of it, but you also look at the business win that we have and we've added those sets in and we're seeing those up and running. Natural gas is volatile. We've seen a move around in the month, but the ability to be agile is what we look at.

[Kenny Rocker, Executive VP of Marketing & Sales at Union Pacific]

The

[Operator]

next question is from the line of David Vernon with Bernstein. Please proceed with your question. I

[David Vernon, Vice President and Senior Analyst at Bernstein]

wanted to ask maybe, Kenny or Jennifer, when we're talking about the best pricing we've had in about ten years, can you help us sort of understand kind of how much it has improved kind of either sequentially or relative to where we were sort of last year? What specifically has changed to drive it? Are we starting

[David Vernon, Vice President and Senior Analyst at Bernstein]

to see the benefits of

[David Vernon, Vice President and Senior Analyst at Bernstein]

a better service product like or is this just you guys are being more effective on capturing price in coal, for example? And then what are you thinking about the ability to sustain that best level of pricing in ten years as we go through the rest of this year? Thank you.

[Kenny Rocker, Executive VP of Marketing & Sales at Union Pacific]

I'll start and if you want to jump in, Jennifer. So and I'm going to be a broken record here, but look, when you have a strong service product for what you sold to the customers, you can lead with that. When you have a strong service product plus the investments that you have, you can lead with that. We sit down with our customers, share the service performance index with them and we know what acceptable levels of pricing are. And so we leave with that.

[Kenny Rocker, Executive VP of Marketing & Sales at Union Pacific]

Now, I'll tell you, I think there was a question about I think it was about mindset or will it sustain. We will always have a mindset to go out there and price to the service that's sold. That won't change. The team is crystal clear on that. So there you have it.

[Jennifer Hamann, Executive VP & CFO at Union Pacific]

Yes. Kenny, I really don't know that I can add to that. But when you walk through the drivers of our price, you hit on all of them. The only part of the market right now that's not supportive to our pricing is that truck piece, which we've been talking about. So if we can get a little bit of help from that, that could be further good news for us.

[David Vernon, Vice President and Senior Analyst at Bernstein]

Go ahead.

[Jim Vena, CEO at Union Pacific]

Sorry about that, but let me if I if you just give me a second here and appreciate it. At the end of the day, what we've also done is we've invested in being able to give more markets for our customers, whether it's what we did at the East End Of The LA Basin at Colton with the new facility there, what we've done in Phoenix, what we're doing in Kansas City, but not just in Minneapolis, I could keep on going on that side of the business. But we've invested with our customers in the industrial base and in the bulk base. We've opened up new facilities. So pricing comes by being able to provide baseline service at a high level and consistent, not just customers and no one likes it if it's one week or a month.

[Jim Vena, CEO at Union Pacific]

It has to be consistent. And I think we've been able to show that for the last few quarters that we're very consistent and we have a good handle of how to operate this railroad. We went through we didn't even talk about winter. Some people like to talk about winter. We had winter.

[Jim Vena, CEO at Union Pacific]

We had storms. We had floods. But at the end of the day, the resiliency in the way we operate the railroad and the buffer is real important to us. And the last thing is on the carload business which is real important to us especially when it comes to pricing and margin in the markets that they serve is we've expanded our fluidity. We spent a lot of money in that Houston area to be able to improve our hump yard and we just about doubled the capacity of the place that removes touch points and that allows you to give better service and allows you to open more markets for our customers.

[Jim Vena, CEO at Union Pacific]

So it's a complicated decision making in what we've done. So just to add on to what was already said by Kenny and Jennifer, that's the way we look at it.

[David Vernon, Vice President and Senior Analyst at Bernstein]

All right. Thanks for that. And then maybe if I could just tackle more on here. Have you guys seen any sort of change in cross border Mexico volumes either Laredo or Eagle Pass as we've been dealing with some of these the tariff imposition? I'm just wondering if there's been any noticeable sort of shift in that North South volume.

[Jim Vena, CEO at Union Pacific]

Wes, why don't you talk about what we've seen in the last sort of year or so and what we've seen sort of a balance against our competitor and then what we've seen more recently?

[Kenny Rocker, Executive VP of Marketing & Sales at Union Pacific]

Yes. So if you look at it, and it does start with the fundamentals. It does start with the fact that we've got seven day a week service, that we've got the best route. We've got shorter miles. We've got a faster route.

[Kenny Rocker, Executive VP of Marketing & Sales at Union Pacific]

But if you look at Mexico, when we talk to our customers, and we've been there over thirty years. When we talk to our customers, yes, because I've just mentioned all those attributes, we know we can win and compete. But we're also selling the entire network. So it's not just one part of Texas or one lane that we're going in, we're moving and utilizing the entire network. You look at the last quarter, yes, there were stops and starts, especially when you look at our automotive segment.

[Kenny Rocker, Executive VP of Marketing & Sales at Union Pacific]

You heard me say in my words, we really sat closely with our customers and focused on the fundamentals, which for us in Mexico is the service product, the interchange, making sure we have enough equipment. And where we see ourselves today, we certainly don't try to manage our business to a market share, but we feel good about where we are and we know we're up a few points as we look at our market share so far this year.

[Jim Vena, CEO at Union Pacific]

Thanks for the second question. Appreciate it.

[Operator]

The next question is from the line of Richa Hormain with Deutsche Bank. Please proceed with your question.

[Jim Vena, CEO at Union Pacific]

Good morning.

[Richa Harnain, Director - Lead Surface Transportation & Airfreight Equity Analyst at Deutsche Bank]

Good morning. So your execution this quarter was strong, all things considered. But clearly, just from the tone of some of these questions, there is a lot of fear out there. And a lot of that's related to your exposure. So maybe you can help call those by sizing up your exposures a little bit, I was hoping.

[Richa Harnain, Director - Lead Surface Transportation & Airfreight Equity Analyst at Deutsche Bank]

Like for instance, with grain exports, appreciate, Kenny, you saying that is very strong given Mexico and speaking to the agility of your network. But can you tell us how much of that business is Mexico exports versus China? And just on international intermodal, you said that that's about 40% of total premium for 2024. Can you tell us how much is West Coast or China oriented? Thank you.

[Kenny Rocker, Executive VP of Marketing & Sales at Union Pacific]

Yes. So, we talked about the grain. I certainly unfortunately won't be able to give you any specifics and break out our grain network. What I'll tell you though is that, I mentioned strength in grain. We've been growing there.

[Kenny Rocker, Executive VP of Marketing & Sales at Union Pacific]

I mentioned the rail and physical infrastructure that we have on the origin side to grow that market. We're focused on expanding the pie even if it means and that's why I wanted to emphasize that we are moving in the different markets like The Gulf and in The Mexico. There was a question on international intermodal, I think, you wanted me to break out those numbers. And I'll stay away from doing that and just let you know that a strong service product along with the new products that we have, we inserted a new product. Jim talked about it in the Twin Cities.

[Kenny Rocker, Executive VP of Marketing & Sales at Union Pacific]

And last year, we were able to have get a good win that will still continue into this year. We're seeing a little bit more growth into the new market, new ramp that we have on our in Arizona and the Phoenix area. And we've inserted new products going from The Gulf to other parts of our network. So, we're going to be pretty aggressive about building out that network and not being dependent on one area.

[Richa Harnain, Director - Lead Surface Transportation & Airfreight Equity Analyst at Deutsche Bank]

Appreciate it. Thank you.

[Operator]

Next question is from the line of Jeff Kauffman with Vertical Research Partners. Please proceed with your question.

[Jim Vena, CEO at Union Pacific]

Jeff. Good

[Jeff Kauffman, Partner, Transportation & Logistics Equity Research at Vertical Research Partners]

morning. Thanks for squeezing me in. Jim, I liked your opening comment about how if you just look from 10,000 feet, revenues were flat, margins were flat, outlook's the same, no changes. The reality was anything but. I'm just kind of curious, we look at your forward outlook today for whether it's groups or pricing, as you were talking about core pricing, things like that, what's different today than it was say three months ago when you gave us guidance that's kind of been a legitimate surprise?

[Jim Vena, CEO at Union Pacific]

Well, the biggest surprise is the whole discussion of import exports tariffs and the effect on the business. And like I said, to start off with our biggest worry and what we look at and it's not a worry, it's just I don't worry, okay. So that was a mistake by me. I don't worry. You have to react and be able to run the business and operate it in a smart manner is what the consumer is going to do.

[Jim Vena, CEO at Union Pacific]

So far, we haven't seen a huge impact. And if anything, we really haven't seen it. Our carloads are up across the board in most places still from where we were last year. But that's the thing that we have to keep an eye on. And it's a daily exercise.

[Jim Vena, CEO at Union Pacific]

Every day we look at what's happening to The U. S. Consumer in the market because that's who the final customer is for us.

[Jeff Kauffman, Partner, Transportation & Logistics Equity Research at Vertical Research Partners]

If I take out the intermodal uncertainty part of it or the international trade certainty and you just look more at the bulk or industrial groups, What was the legitimate surprise there, positive or negative?

[Jim Vena, CEO at Union Pacific]

Well, I think I don't like to think about it as a surprise. The things that we not be in a surprise. We have done a great job this quarter. I give Eric and the entire team a pat on the back. They've done a great job.

[Jim Vena, CEO at Union Pacific]

Jennifer has done a great job to set us up to handle financially anything that we need. You can see where our rating is 2.8 debt to EBITDA. You can see where our cash is. We're in a great position there. And Kenny and team have done a great job of pricing for the value of what we provide.

[Jim Vena, CEO at Union Pacific]

The things that we can't control are the things that we have to look at very carefully. And just at this point, I think at the end of the day we come to the right place as a country, but I think there is going to be some noise and we will react to whatever noise is thrown at us.

[Jeff Kauffman, Partner, Transportation & Logistics Equity Research at Vertical Research Partners]

Okay. Thank you.

[Jim Vena, CEO at Union Pacific]

You are welcome.

[Operator]

Our next question comes from the line of Oliver Holmes with Redburn Atlantic. Just

[Oliver Holmes, Director - Equity Research at Redburn Atlantic]

a quick one. Is there a scenario, maybe you're already seeing it, where Asia ex China and Mexico pick up share if the trade war with China continues, in essence reducing the impact of Chinese tariffs? And maybe just a follow-up on that. Is this something you saw during twenty eighteen-twenty nineteen when tariffs were levied on China? Thanks.

[Jennifer Hamann, Executive VP & CFO at Union Pacific]

Yes. Thanks for that question. I think, Kenny, the question he's asking is, are you seeing more in terms of shifts away from China to Vietnam, Yes.

[Kenny Rocker, Executive VP of Marketing & Sales at Union Pacific]

Okay, good. So there's some good public data out there. And you can see, Oliver, over the last few quarters, a little bit of a change. We look at the IANA data and you can see a little bit of a change from China going into the Southeast Asia piece. It's held strong.

[Kenny Rocker, Executive VP of Marketing & Sales at Union Pacific]

Those volumes have held strong. We can see them coming up to us. We like the fact that there is diversity in that and we're going to continue to take advantage of it.

[Jim Vena, CEO at Union Pacific]

It sure is a moving target though. Pressures of what's happening in the marketplace right now and what's happening to trade will have an effect. It just takes a while for some of those things to settle down. Thanks for the question. Thanks.

[Operator]

The next question is from the line of Jason Seidl with D. D. Cowen. Please proceed with your question.

[Jason Seidl, Managing Director at TD Cowen]

Thanks, operator. Good morning. And Jim, I feel your pain on being down to nothing here. Jennifer, I think the question goes to you. You guys did a pretty good job of managing sort of salaries, wages and benefits per employee in 1Q.

[Jason Seidl, Managing Director at TD Cowen]

Wondering how we should think about that line item going forward? And then just to clarify, I believe you talked about that $46,000,000 gain in last year's 2Q. Was that in other income?

[Jennifer Hamann, Executive VP & CFO at Union Pacific]

Okay. So for the first part of your question, we laid out in January that we expected for the full year our comp per employee cost per employee to be up 4%. You're right, did a great job in the first quarter only up 2%. At this point, we would stick with the 4% just because as we're looking ahead we know that July 1 is another wage increase. We're obviously still negotiating with our unions.

[Jennifer Hamann, Executive VP & CFO at Union Pacific]

But as you know we accrue regardless of if we started paying those wage increases or not. And then we also have we think this will be towards the back part of the year, but we also are working towards an agreement with our Smart TV, our conductors union, in terms of work rest for them. So that's why we're holding with that 4% in terms of the cost per employee in terms of the outlook on a full year basis. In terms of your other question, that was in the other expense line in terms of the $46,000,000 where that flowed through as a good guy last year.

[Jason Seidl, Managing Director at TD Cowen]

Perfect. Thank you very much. Appreciate the time.

[Jim Vena, CEO at Union Pacific]

Okay. Thank you.

[Operator]

Thank you. Our final question is from the line of Hiram Nathan with Daiwa. Please proceed with your question.

[Jim Vena, CEO at Union Pacific]

Good morning.

[Jairam Nathan, Executive Director at Daiwa Capital Markets]

Thanks for taking my question. Just on we talked a lot about what you can do on the cost side and stuff, but I just wanted to understand on the balance sheet in terms of share repurchases, if things get long drawn or you see a bigger and bigger impact, how should we think of your capital return plan between share repurchase, conserving cash?

[Jennifer Hamann, Executive VP & CFO at Union Pacific]

Yes. So thanks for that question. So off to a really strong start here in 2025. Our guide for the year in terms of share repurchases was 4,000,000,000 to $4,500,000,000 At this point, I think we're at a little over 1,700,000,000.0 in terms of what we've returned so far, 1.5% through the accelerated share repurchase program and another $200,000,000 in open market purchases. So in one quarter, almost halfway there, I'd say we feel very good about that range.

[Jennifer Hamann, Executive VP & CFO at Union Pacific]

Obviously, we'll watch it. If the situation changes, we can scale back. That is the flexible lever. We've got $1,400,000,000 on the balance sheet today. So again, we're reiterating the guide to the 4,000,000,000 to 4 point and that's our view for the full year and feel confident in that.

[Jennifer Hamann, Executive VP & CFO at Union Pacific]

But if the world changes dramatically for us, we can flex that.

[Jairam Nathan, Executive Director at Daiwa Capital Markets]

Thank you. That's all I had.

[Operator]

Thank you. This concludes the question and answer session. I'll now turn the call back over to Mr. Venna for closing comments.

[Jim Vena, CEO at Union Pacific]

Well, listen, I think the questions were spot on. There were questions that we ask ourselves every day. I think we have shown as Union Pacific what we can do and how we can react and I think that's real important. At the end of the day, truly it would be a boring job. I probably wouldn't be here if you woke up every morning and everything was perfect.

[Jim Vena, CEO at Union Pacific]

You get you see the quality of a company and you see the quality of the management when you see how they react to things. And I think the team did a great job first quarter, very excited with what we have going on fundamentally. And in the long term, I like where Union Pacific is. And so with that, let's sign off. I know we have our Annual General Meeting happening in May and we will be talking to our owners then.

[Jim Vena, CEO at Union Pacific]

Thank you very much everyone for taking time to join us this morning. Have a good one.

[Operator]

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may now disconnect your lines at this time and have a wonderful day.

Participants

Executives

• Jim Vena, CEO
• Jennifer Hamann, Executive VP & CFO
• Kenny Rocker, Executive VP of Marketing & Sales
• Eric Gehringer, Executive VP of Operations

Analysts

• Chris Wetherbee, Senior Analyst at Wells Fargo
• Tom Wadewitz, Senior Equity Research Analyst at UBS Group
• Fadi Chamoun, Transportation Analyst at BMO Capital Markets
• Brandon Oglenski, Director & Senior Equity Analyst at Barclays
• Scott Group, MD & Senior Analyst at Wolfe Research
• Ken Hoexter, Managing Director at Bank of America
• Brian Ossenbeck, MD - Senior Analyst, Transportation at JP Morgan
• Jonathan Chappell, Senior Managing Director at Evercore ISI
• Joseph Hafling, VP - Equity Research at Jefferies Financial Group
• Andrzej Tomczyk, Vice President at Goldman Sachs
• Daniel Imbro, Managing Director at Stephens Inc
• Ari Rosa, Senior Analyst at Citigroup
• David Vernon, Vice President and Senior Analyst at Bernstein
• Richa Harnain, Director - Lead Surface Transportation & Airfreight Equity Analyst at Deutsche Bank
• Jeff Kauffman, Partner, Transportation & Logistics Equity Research at Vertical Research Partners
• Oliver Holmes, Director - Equity Research at Redburn Atlantic
• Jason Seidl, Managing Director at TD Cowen
• Jairam Nathan, Executive Director at Daiwa Capital Markets