Union Pacific Q2 Earnings Call Highlights

Key Points

• Union Pacific reported record Q2 2026 results, with net income of $2 billion and adjusted EPS of $3.41. Revenue rose 12% to $6.9 billion, helped by 2% volume growth, pricing gains, and higher fuel surcharge revenue.
• The company raised its full-year 2026 EPS outlook to high single-digit growth, while acknowledging fuel prices remain a major cost headwind. Cash from operations increased 21% to $5.5 billion, and Union Pacific paid down $1.5 billion in long-term debt in the first half.
• Operational performance improved across the network, with record freight car velocity, train speed, and terminal dwell metrics. Management also highlighted continued progress on the proposed Norfolk Southern merger, including a new settlement agreement with Canadian National.

Union Pacific NYSE: UNP reported record second-quarter 2026 financial results, with executives citing volume growth, pricing gains and improved operating performance, while also raising the railroad’s full-year earnings outlook.

Chief Executive Officer Jim Vena said the company delivered “record financial results driven by strong execution and 2% volume growth.” Net income totaled $2 billion, and earnings per share were $3.36 on a reported basis. Adjusted for merger costs, EPS was $3.41.

“There was a lot of in and outs as we compare our performance against last year,” Vena said, noting fuel was a major driver of both surcharge revenue and expense. Excluding those factors, he said Union Pacific saw “solid core improvement” in revenue and operating income.

Revenue Rises as Fuel Surcharges and Volume Lift Results

Chief Financial Officer Jennifer Hamann said operating revenue rose 12% from a year earlier to $6.9 billion, while freight revenue also increased 12% to $6.5 billion. Fuel surcharge revenue contributed 750 basis points to freight revenue growth and increased by roughly $460 million, reflecting higher fuel prices and volume.

Volume growth added 225 basis points to freight revenue, while core pricing and business mix contributed 175 basis points. Hamann said the company’s “quarterly pricing dollars continue to exceed inflation dollars” as Union Pacific competes for business at levels reflecting the value of its rail service.

Business mix was a slight headwind in the quarter, Hamann said, as stronger-than-expected domestic intermodal growth offset the mix benefit from lower international intermodal traffic.

Operating expenses rose 13% to $4.1 billion, primarily due to higher diesel fuel prices. Fuel expense increased 63%, driven by a 60% increase in the average fuel price and 2% higher gross ton miles. The company’s average price per gallon rose to $3.86 from $2.42 a year earlier, adding 120 basis points to the operating ratio.

Union Pacific’s operating ratio was 59.2% in the quarter. Hamann said cash from operations increased 21% to $5.5 billion, while free cash flow totaled $1.8 billion after network reinvestment and dividends. The company also paid down $1.5 billion of long-term debt in the first half, bringing adjusted debt-to-EBITDA to 2.5 times.

Company Raises 2026 EPS Outlook

Union Pacific raised its 2026 outlook to reported EPS growth in the high single-digit range, up from its prior outlook for 6% year-to-date growth in line with January expectations. Hamann said the company expects continued operating ratio improvement despite pressure from fuel costs.

“Fuel prices remain volatile,” Hamann said, adding that recent purchases have been above $4 per gallon. In response to an analyst question, she said fuel would likely continue to pressure the operating ratio, but Union Pacific expects volume opportunities and productivity gains to help offset that headwind.

Vena said he would prefer lower fuel prices despite the revenue benefit from fuel surcharges, because sustained high fuel prices could affect customers and consumer demand. Hamann said the company has not yet seen that demand impact.

Bulk, Industrial and Premium Segments Show Mixed Trends

Executive Vice President of Marketing and Sales Kenny Rocker said second-quarter freight revenue excluding fuel surcharge grew 4% to $5.5 billion, which he described as a record.

In the bulk segment, revenue rose 7% despite a 1% decline in volume. Grain and grain products posted double-digit volume growth, driven by export demand, facility expansions, renewable fuels and related feedstocks. Rocker said the category delivered record second-quarter volume and revenue. Coal volume was pressured by weaker natural gas prices, mild weather and customer downtime.

Industrial revenue increased 8% on 3% volume growth. Petrochemicals benefited from improved demand and new business, while metals and minerals volumes rose on higher domestic steel production and business development wins, offsetting weakness in export soda ash.

Premium revenue rose 21% on 4% volume growth and a 16% increase in average revenue per car. Domestic intermodal posted its fourth consecutive record quarter in both volume and revenue, with private asset, rail asset and parcel volumes all up double digits. Rocker said the business benefited from constrained truck capacity and share gains. International intermodal volume fell 14%, though the company saw improvement late in the quarter from stronger West Coast imports.

Looking ahead, Rocker said grain and grain products are positioned for further second-half growth, while coal is expected to remain challenging due to elevated inventories and lower natural gas prices. He also said domestic intermodal should continue to perform well, supported by over-the-road conversions and Union Pacific’s service product.

Operations Improve as Volume Grows

Executive Vice President of Operations Eric Gehringer said Union Pacific delivered record second-quarter operating performance while handling 2% more volume. Employee and derailment rates improved compared with their respective three-year rolling averages.

Freight car velocity increased 5% to 231 miles per day, a second-quarter record. Train speed rose 3%, and terminal dwell improved 7% to 19.7 hours, matching the first-quarter record and marking the third straight quarter below 20 hours. Gehringer said both the intermodal and manifest service performance indexes finished at 95%.

The company also reported record workforce productivity, train length and fuel consumption performance. Locomotive productivity improved 1%, fuel consumption improved 1%, workforce productivity rose 5%, and train length increased 2% from a year earlier.

Gehringer said Union Pacific continues to make strategic capacity investments, including in the Houston Complex, Pacific Northwest siding extensions and Sunset Double Track projects.

Norfolk Southern Merger and CN Agreement Remain in Focus

Vena also provided an update on Union Pacific’s proposed merger with Norfolk Southern. He said the Surface Transportation Board accepted the company’s application as complete on May 28 and that Union Pacific planned to submit supplemental information requested by the board on Monday.

Vena said Union Pacific has expanded its Committed Gateway Pricing and made other voluntary commitments intended to improve the competitive nature of the proposed merger. He also highlighted a newly announced merger settlement agreement with Canadian National.

Vena said the agreement with Canadian National addresses ownership and competitive issues involving the Kansas City terminal and Terminal Railroad Association of St. Louis, while also giving Canadian National access between east of St. Louis and Kansas City. He said the agreement would provide CN with a path to move traffic into Mexico and would give Union Pacific better east-to-west access through Chicago.

Vena argued the merger would create seamless single-line service, improve reliability, lower costs and make rail more competitive against trucks and other railroads. “Now versus almost one year ago when we first announced our plans to merge, we have even more conviction that our transaction is in the public interest,” he said.

About Union Pacific (NYSE:UNP)

Union Pacific Corporation NYSE: UNP is one of the largest freight railroad companies in the United States. Its principal operating subsidiary, Union Pacific Railroad, has roots that trace back to the Pacific Railway Act of 1862 and the construction of the first transcontinental rail link completed in 1869. The company is headquartered in Omaha, Nebraska, and operates as a holding company for rail transportation and related services.

Union Pacific's core business is the movement of freight by rail across an extensive rail network serving the western two‑thirds of the United States.

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