Union Pacific Corp Earnings - Q3 2025 Analysis & Highlights
Key Takeaways
Union Pacific's Q3 2025 earnings call highlighted strong financial results driven by core pricing gains and operational efficiencies, despite some volume softness and macroeconomic headwinds. Key topics included the company's financial performance, business segment results, capital allocation strategy, industry trends, competitive landscape, and the proposed merger with Norfolk Southern.
Key Financial Results
Q3 2025 earnings per share (EPS) were reported at $3.01.
Adjusted EPS, excluding merger-related costs, increased 12% year-over-year to $3.08.
Freight revenue, excluding fuel, grew for the sixth consecutive quarter and set a best-ever record.
The adjusted operating ratio improved by 180 basis points year-over-year to 58.5%.
Operating revenue increased 3% year-over-year to $6.2 billion.
Freight revenue totaled $5.9 billion, up 3%.
Net income totaled $1.8 billion, with earnings per share of $3.01.
Cash from operations totaled $7.1 billion, up 6% or $381 million versus last year.
Business Segment Results
Bulk segment revenue increased 7% year-over-year due to strong coal demand and export wheat shipments.
Industrial revenue was up 3% year-over-year, driven by increased petrochemical, construction, and metal shipments.
Premium revenue declined 2% year-over-year, with international intermodal volumes decreasing 17%.
Domestic intermodal segment delivered record-breaking volumes.
Capital Allocation
The share repurchase program has been paused due to the merger with Norfolk Southern.
$1 billion in long-term notes were paid down during the third quarter.
The adjusted debt-to-EBITDA ratio finished the quarter lower at 2.6 times.
The company funded its capital program and paid the increased third-quarter dividend, marking the 19th consecutive year of providing shareholders with an annual dividend raise.
Industry Trends and Dynamics
Automotive sales and housing starts are generally softer than when Investor Day targets were established.
International intermodal volumes reflect a tough comparison against the prior year's strong growth.
Coal volumes are expected to continue outpacing 2024 due to natural gas prices and a partnership with LCRA.
Petrochemicals market is positioned to finish strong, driven by investments in the Gulf Coast franchise.
Energy and specialized markets are expected to remain challenged due to fewer petroleum shipments.
Competitive Landscape
The proposed merger with Norfolk Southern aims to create a more competitive transcontinental railroad.
Management believes the merger will enhance competition and improve service for customers.
The company is willing to provide access to certain locations to other railroads to maintain optionality for customers.
Other railroads are reacting to the proposed merger by seeking ways to cooperate and compete more effectively.
Macroeconomic Environment
Key economic indicators like automotive sales and housing starts are generally softer than anticipated.
International intermodal volumes are down, reflecting tough comparisons against last year's strong growth.
The truck competitive market remains very challenging, impacting intermodal pricing.
Growth Opportunities and Strategies
The company is focused on driving continued improvements in its pursuit of what's possible.
Union Pacific is focused on outperforming its markets while pricing to the value it provides customers.
The company aims to lead the industry in safety, service, and operational excellence.
Business development efforts in grain products are helping offset market uncertainty in renewable fuels and grain markets.
The company is focused on leveraging technology to optimize its workforce.
Financial Guidance and Outlook
The company expects to achieve its three-year EPS CAGR view of high-single to low-double-digit growth.
Accretive pricing, industry-leading operating ratio, and return on invested capital are reaffirmed.
Volumes are currently running down 6% in the fourth quarter due to lower international intermodal volumes.
The team understands the task and is working hard to drive more volume to the railroad in a safe, efficient manner.
Cash balance is expected to steadily grow with strong cash generation.
Full-year compensation per employee is expected to end up around 3%.
