Union Pacific Corp. (UNP) shares traded higher Thursday after the railroad operator reported second-quarter 2026 results that beat analyst expectations for adjusted earnings and revenue.

Adjusted diluted EPS of $3.41 topped the $3.24 estimate, while operating revenue rose 12% to $6.864 billion, beating the $6.713 billion estimate.

Earnings And Revenue

Net income rose 6% to a record $1.993 billion. GAAP diluted EPS increased 7% to $3.36, while adjusted net income climbed 12% to $2.028 billion, excluding $35 million in acquisition-related costs.

Freight revenue increased 12% to a record $6.518 billion, with carloads up 2%.

Union Pacific posted its highest-ever freight revenue during the second quarter, driven by higher volumes, pricing gains and fuel surcharge revenue.

Premium revenue jumped 21%, including 26% intermodal growth. Industrial revenue rose 8%, bulk increased 7%, and coal and renewables declined 4%.

Margins And Operations

Operating income rose 9% to a record $2.763 billion.

The reported operating ratio increased to 59.7%, while the adjusted ratio rose to 59.2%. Higher fuel prices created a 120-basis-point headwind.

Fuel expense jumped 63%, but productivity gains and lower staffing partly offset higher fuel, inflation, and merger costs.

Freight car velocity improved 5%, terminal dwell fell 7%, workforce productivity rose 5%, and train length increased 2%. Safety metrics also improved.

Cash Flow And Debt

Year-to-date operating cash flow increased to $5.516 billion from $4.543 billion, while free cash flow rose to $1.812 billion from $1.105 billion.

Union Pacific invested $1.810 billion in capital and repaid $1.506 billion of debt. It ended the quarter with $1.614 billion in cash and $30.327 billion in total debt. Adjusted debt-to-adjusted EBITDA stood at 2.5 times.

Conference Call Highlights

Management said second-half demand is tracking above initial expectations, supported by industrial activity, grain, petrochemicals and domestic intermodal.

Nearly all stored containers are deployed, prompting faster asset turns and selective surcharges.

Compensation per employee is expected to rise about 6%, while fuel costs above $4 per gallon remain a margin headwind.

Union Pacific also signaled improving demand trends, saying international intermodal traffic is expected to return to growth in the second half after lapping last year's tariff-driven volatility in August.

Management also cited about 200 industrial-development inquiries and strong July carloads.

Norfolk Southern Transaction

The Surface Transportation Board accepted the Norfolk Southern Corp. (NSC) merger application as complete on May 28. Union Pacific also expanded gateway pricing and other commitments after customer feedback.

Separately, Union Pacific reached a settlement with Canadian National Railway Co. (CNI) to address competitive concerns tied to the merger.

The agreement gives Canadian National access between the St. Louis area and Kansas City and a route into Mexico over Union Pacific's network, while improving Union Pacific's east-west access through Chicago.

Management said the arrangement covers the limited customer overlaps and should support traffic growth rather than reduce expected merger benefits.

Outlook

Union Pacific raised its 2026 outlook to high-single-digit reported EPS growth despite a mixed economic forecast.

The company affirmed pricing above inflation, operating-ratio improvement, strong cash generation, a $3.3 billion capital plan, and consistent annual dividend increases.

UNP Price Action: Union Pacific shares were trading 5.30% higher at $308.06 at the time of publication on Thursday.