Weekly insights + SMS alerts
Union Pacific Corp. (NYSE:UNP) stock rose Thursday after the railroad operator reported better-than-expected third-quarter earnings and revenue, as higher freight volumes helped offset soaring fuel costs.
Union Pacific reported adjusted earnings of $3.53 per share, up 15% year over year and beating analysts' consensus estimate of $3.47.
Revenue increased 15% to $7.197 billion, exceeding Wall Street's estimate of $7.125 billion.
Net income rose 16% to $2.076 billion, while GAAP earnings increased to $3.49 per share from $3.01 a year earlier.
Operating income climbed 15% to $2.943 billion. The reported operating ratio improved 10 basis points to 59.1%, while the adjusted operating ratio improved 30 basis points to 58.8%.
However, fuel expenses surged 69% to $1.04 billion as average fuel prices jumped 64% to $4.21 per gallon.
Higher fuel costs pressured the reported operating ratio by 140 basis points, presenting an unexpected challenge to profitability.
Chief Financial Officer Jennifer Hamann said fuel prices were the biggest variable management had not anticipated entering the year.
Union Pacific partially offset the pressure through efficiency improvements, reducing its fuel consumption rate by 2% to 1.034 gallons per thousand gross ton-miles.
Locomotive modernization, longer trains and technology improvements helped reduce fuel consumption.
Hamann also said rail transportation's fuel efficiency advantage over trucking was helping the company attract additional freight business.
Union Pacific reported growth across its major freight businesses, supported by stronger industrial and premium shipments.
Bulk revenue increased 10% to $2.116 billion despite flat volumes.
Industrial revenue climbed 14% to $2.509 billion, driven by a 6% increase in volume.
Premium revenue jumped 21% to $2.188 billion as volumes rose 9%. Intermodal revenue surged 27% to $1.517 billion.
Operational efficiency also improved. Freight car velocity increased 1% to 228 miles per day, while terminal dwell time declined 2% to 19.9 hours.
Workforce productivity rose 5%, and average train length increased 2% to 9,969 feet.
CEO Jim Vena said the results demonstrated Union Pacific's ability to handle 6% volume growth while maintaining service reliability and operating efficiency.
During Thursday's earnings call, Vena expressed overwhelming confidence that Union Pacific's proposed merger with Norfolk Southern Corp. (NYSE:NSC) would receive regulatory approval.
"I'm 99.999 sure that it's going to be approved," Vena said.
He described the combination as largely an end-to-end transaction with limited competitive concerns requiring regulatory remedies.
Vena also said more than 500 customers had submitted letters supporting the proposed merger.
Union Pacific is preparing for the next stages of the Surface Transportation Board's review process.
Hamann said the company would continue building cash reserves ahead of an anticipated merger closing in the second half of 2027.
Union Pacific reported year-to-date operating cash flow of $8.302 billion, up 18%, while free cash flow increased to $2.362 billion.
The company repaid $1.519 billion in debt and ended the quarter with $2.211 billion in cash and $30.324 billion in total debt.
Union Pacific reaffirmed its outlook for high-single-digit earnings-per-share growth in 2026 and pricing gains above inflation.
The railroad also updated its 2026 capital spending plan to $3.5 billion, reflecting investments in growth and the acceleration of projects previously scheduled for 2027.
UNP Price Action: Union Pacific shares rose 2.91% to $296.24 on Thursday at the time of publication.
Real-time alerts on price moves, news, and trading opportunities.
Join 20,000+ investors. No spam, ever.
