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Omaha-based Union Pacific's principal operating company, Union Pacific Railroad, serves 23 states.

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Union Pacific is the parent company of Union Pacific Railroad, which specializes in shipping products across the U.S., especially by rail. The company ships products such as fertilizer and grain products but also finished automobiles and various types of merchandise in special intermodal containers. Union Pacific has a long history, having been founded in 1862 as part of the Pacific Railway Act approved by President Abraham Lincoln, which led to the creation of the first transcontinental railroad. In modern times, the company services 23 western U.S. states, not just with transportation via rail but also intermodal shipments.

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Union Pacific (UNP): Company Profile, Stock Price, News, Rankings

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Union Pacific

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Greetings, and welcome to the Union Pacific Second 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 is being recorded and the slides for today's presentation are available on Union Pacific's website. It It's now my pleasure to introduce your host, Mr. Jim Vena, Chief Executive Officer for Union Pacific. Thank you, Mr. Vena. You may now begin your presentation.

Thanks, Rob, and thanks everyone for joining us this morning. Another beautiful day in Omaha. A little bit of thunderstorms last night, but the skies are clear this morning and wonderful day to be railroading. So good morning, everyone, and thank you for joining us today for Union Pacific's second quarter twenty twenty five earnings call. 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 this morning, we are delivering on our strategy and our results demonstrate our commitment to leading the industry as we set new standards for safety, service and operational excellence. Now if we turn over to slide three, this morning Union Pacific reported twenty twenty five second quarter earnings per share of $3.15 We had two unusual and offsetting items in the second quarter, a deferred tax benefit and the labor expense for a crew ratification agreement both of which Jennifer will discuss in more detail. Excluding those items our adjusted earnings per share is $3.3 up 12% versus last year's adjusted results. Volume growth, core pricing gains and productivity improvements drove the solid results in the quarter. Our adjusted second quarter operating ratio was 58.1% improving two thirty basis points versus last year's adjusted results.

Freight revenue excluding fuel surcharge grew 6% in the second quarter setting best ever quarterly and year to date records in 2025. In addition, we set quarterly records in both quarters for workforce productivity with second quarter ranking as the best ever. Importantly, we efficiently handled the first half volume growth while also improving our safety and service performance. I'm very comfortable with where we are and pleased with the level of execution I see across the company. Next, the team will walk you through the quarter in more detail, and then I'll come back and wrap it up before we go to Q and A. With that, Jennifer, second quarter results.

All right. Thank you, Jim, and good morning, everyone. I'll start with a walk down of our second quarter income statement on slide five with operating revenue of $6,200,000,000 improved 2% versus last year, while freight revenue of $5,800,000,000 set a second quarter record and increased 4%. Breaking down the drivers of freight revenue, volume growth in the quarter added three seventy five basis points. Fuel surcharge revenue of $569,000,000 declined 100,000,000 or two twenty five basis basis points as lower year over year fuel prices reduced our freight revenues. Price combined with mix for a 200 basis point benefit to freight revenue versus last year as strong core pricing dollars more than offset the continued business mix impact.

We are disciplined in our pricing supported by a strong service product and for the third consecutive quarter yielded price dollars net of inflation that were accretive to our operating ratio. Wrapping up the top line, other revenue declined 16% to $311,000,000 Included in the year over year change are the items that we've discussed previously, last year's intermodal equipment sale and the metro transfer. Also impacting other revenue in the quarter were lower accessorial and subsidiary revenues. Switching to expenses, our appendix slides provide some more detail, but I'll walk through the highlights as operating expense increased only 1% to $3,600,000,000 against a 4% increase in quarterly volume. Looking closer at the expense lines, compensation and benefits increased 5% driven by the Brakeperson buyout agreement of $55,000,000 This is the third and final Brakeperson agreement further enabling more efficient car handling.

When you adjust for the Brakeperson agreement, quarterly compensation and benefits expense increased 1% while our cost per employee increased 3.5%. These results demonstrate how a 3% lower workforce level and strong productivity almost entirely offset the impact of wage inflation. We would expect a similar level of increase in compensation per employee for the full year as we continue to leverage process improvements and technology to offset wage increases. Additionally, in the quarter, we transferred close to two fifty employees to Metra completing the majority of the transfers we began in the second quarter of twenty twenty four. Fuel expense declined 8% on an 11% decrease in fuel prices from $2.73 to $2.42 per gallon.

Our fuel consumption rate improved 2% and set a second quarter record. Ongoing benefits from our fuel and locomotive initiatives coupled with running a more fuel efficient business mix drove the improvement. Equipment and other rents increased 5% driven by lower equity income and our business mix. Finally, other expense improved 5% versus last year. Lower casualty including environmental costs more than offset last year's $46,000,000 gain from the intermodal equipment sale.

Our reported operating income grew $2,500,000,000 a second quarter record. Income tax expense improved 14% as the state tax legislation change provided a one time deferred tax benefit of $115,000,000 more than offsetting the tax increase from higher income. Our reported net income totaled $1,900,000,000 and earnings per share was $3.15 Excluding those unusual items in the quarter, adjusted earnings per share was $3.3 Our adjusted operating ratio came in at 58.1% reflecting the 90 basis point impact of the break person agreement. Overall, a very strong quarterly performance by the team executing on all elements of our strategy and demonstrating what's possible from the Union Pacific franchise. Turning to shareholder returns and the balance sheet on slide six.

Our second quarter cash from operations totaled $4,500,000,000 up more than $500,000,000 versus last year. Through the second quarter, we returned $4,300,000,000 to our shareholders through a combination of share repurchases and dividends. And in keeping with our Investor Day commitments, we announced a 3% dividend increase last week. This marks the nineteenth consecutive year of annual increases. Our adjusted debt to EBITDA ratio finished the quarter at 2.8 times and we remain A rated by our three credit rating agencies.

Looking out to the remainder of 2025 on slide seven, we expect third quarter other revenue to be in line with our second quarter results due to continued softness in the autos market and lower asset sales. Additionally, other income will look more like first quarter results as a result of lower expected real estate gains. For volume, everyone recalls the benefit that we experienced in the 2024 from the surging international intermodal flows through the West Coast ports. Month to date in July, we are seeing the impact of the tariff pause as reflected in the current volume surge. Similar to last year, we're seamlessly handling this volume, although we do expect volume to moderate to the point of sequential declines through the quarter.

On the flip side, our diverse franchise is providing numerous growth opportunities, which Kenny will discuss a bit later. Operationally, we plan to stay the course and keep driving improvement, working safely, controlling our costs, providing good service and seeking out price opportunities that reflect the value of that service product. Our second quarter results support our conviction in the three year targets introduced last September. Specific to 2025, EPS growth will be consistent with attaining our three year EPS CAGR view of high single to low double digit growth. Further, we reaffirm our view on accretive pricing, industry leading operating ratio and ROIC.

And of course, our capital deployment strategy is unchanged. Unchanged. The team is confident, energized and ready to deliver value for our stakeholders. With that, I'm going to turn it over to Kenny to provide more details on the business.

Thank you, Jennifer, and good morning. We delivered a solid second quarter. Freight revenues totaled 5,800,000,000 which was up 6% excluding fuel surcharges, driven by strong core pricing gains and increased volume. Confident in the strength of our service product, the team remains bullish on our pricing strategy and this approach continues to deliver positive results. Let's jump right in and talk about the key drivers for each of these business groups.

Starting with our Bulk segment, revenue for the quarter was up 10% compared to last year with an 11% increase in volume while lower fuel surcharge and business mix resulted in a slight decrease in average revenue per car. Strength in coal was driven by strong customer demand due to favorable natural gas pricing and the start of lower Colorado River Authority shipments. Softer domestic grain demand was more than offset by strength in export shipments to The Gulf and Mexico resulting in double digit growth. Grain products volume was also up for the quarter, which continues to be driven by new soybean crush production Nebraska and Kansas. Turning to Industrial.

Revenue was up 4% for the quarter on a 3% increase in volume and a 2% increase in average revenue per carload. Strong core pricing gains were partially offset by business mix and lower fuel surcharges. Rock shipments remained solid this quarter, driven by strong customer demand and favorable weather conditions compared to last year. And increased shipments of industrial chemicals were partially offset by continued softness in our forest products markets. Premium revenue for the quarter was down 4% on a 1% increase in volume and a 4% decrease in average revenue per car, reflecting the mix impact of increased international intermodal shipments and lower fuel surcharges.

Intermodal volumes continue to show year over year growth as our business development efforts offset market uncertainty and slower consumer spending. Automotive volumes were down based on reduced OEM production. Turning to slide 10. Despite the challenging market outlook, our hustle mindset and continued focus on business development gives us the edge to outperform. Starting with bulk, we expect coal volumes to significantly exceed last year's levels driven by current forecast on natural gas prices through the remainder of 2025 and the new volume with LCR8.

Grain had a strong first half of the year and while we are still a couple months from the 2025 crop looks favorable and we are working to finalize customer demand. We're evaluating competitive risk to the fourth quarter exports. As it relates to grain products, our intense business development focus will offset policy related uncertainty in renewable fuels and associated feedstocks. Moving to industrial. Our strong investments in our Gulf Coast franchise continue to help us win in the petrochemical market.

For example, we are proud to serve Dow's new expansion in Freeport, Texas, which began operations last month. We anticipate stable performance in the metals and minerals markets. Tariff activity continues to impact metals shipments, but this is balanced by continued strength in construction, specifically in the South. With our exceptional service, we're well positioned to capture that demand. Additionally, we anticipate petroleum volume to remain challenged due to business shift and our commitment to balance volume at the right margin.

Wrapping up with premium, as Jennifer indicated, strong comparisons and port shifts will challenge international and domestic intermodal volume. We saw an uptick in automotive volumes at the end of the second quarter and we recently converted new auto parts volume originating from Mexico. That said, softer vehicle sales are a concern. While we remain mindful of external pressures, including potential tariff implications that could influence consumer behavior, we're focused on the strength within our control and I am confident we'll win in the marketplace. That confidence is reinforced by the investments we're making to expand our capabilities and our footprint.

Just last week, we opened our new Kansas City intermodal terminal, our fourth new intermodal terminal in the past few years. Since 2020, we've invested over $1,400,000,000 to support growth and expansion in our intermodal business. But our focus extends beyond premium. The industrial development team is actively driving projects that are opening new doors for us. So as we move into the second half of the year, I'm encouraged by our dynamic service and adaptability of our team.

What truly sets us apart is our relentless ability to rise to any challenge from unexpected international intermodal volume to surges in coal. We've proven we will deliver. Our commercial and operations teams are working together to unlock growth in unexpected areas. We don't wait for opportunities, we create them, turning momentum into impact and driving results that matter. And with that, I'll turn it over to Eric to review our operational performance.

Thank you, Kenny, good morning. The team delivered another strong operating performance in the second quarter, demonstrating exceptional results behind our strategy of safety, service and operational excellence. Our agility was once again on full display as we effectively handled a 30% surge in coal and renewable shipments, all while providing the service we sold to our customers. Ultimately, it's another proof statement highlighting our robust and reliable service product, which is imperative as we strive to grow with our existing customers and unlock new markets. Moving to key performance metrics on slide 12.

Safety remains our top priority at Union Pacific, and our goal is to be the safest railroad in North America. Importantly, we are making continued progress towards that goal with improvements in both personal injury and derailment rates versus their three year rolling average. We won't stop until each and every employee goes home safe every day. Freight car velocity, the best measure of fluidity on the railroad, improved 10% to two twenty one miles per day. Driving the performance was both reduced terminal dwell as well as increased train speed, which improved 73%, respectively.

We continue to leverage new technology to enhance terminal processes and adjust transportation plans, eliminating touch points while simultaneously improving cycle times. Importantly, we are turning our customers' assets faster, enabling growth through efficiency. Also key is how that translates into our service for our customers. And in the second quarter, both intermodal and manifest service performance improved year over year to 9997%, respectively. Our buffer of resources, coupled with further improvements in line of road variability, terminal run through dwell and first mile last mile performance is generating level of service for our customers.

It's great work by the team as we deliver on our service commitments. Now let's review our key efficiency metrics on Slide 13. As I mentioned before, fluidity is king, and the results on this slide are a byproduct of the exceptional results throughout the quarter. It's the team pushing the limits of what's possible to drive continuous improvements across our railroad. Locomotive productivity improved 5% versus last year, a second quarter record as we efficiently handled a heavier business mix while also improving dwell times across the network.

Workforce productivity, which includes all employees, improved 9% and marked an all time quarterly record. Similar to first quarter, our active train engines and yard workforce decreased 1%, again demonstrating excellent operating leverage against the 4% volume growth. We are confident there is more opportunity in front of us as we leverage technology to make our workforce safer and more efficient. Trail length in the quarter grew both sequentially and year over year. In fact, the second quarter set an all time record at nearly 9,700 feet.

It continues to be an ongoing source of productivity as we look to reduce crew starts, improve asset utilizations and build capacity on our network. Wrapping up, we have tremendous operational momentum, momentum that is enabling growth across our railroad. Our footprint is unparalleled and built to handle that growth. It's on us to execute it in an efficient service focused manner. We will continue to work hand in hand with Kenny's team, remaining agile with our customers to quickly adapt to changes in demand and traffic flows. Jim?

Eric, thank you very much and the entire team. But before we get to your questions, I'd like to quickly summarize what you've heard from all of us. First, as you heard from Jennifer, the team is delivering on our strategy. We're generating carload growth and price by delivering the service we sold to our customers while driving continued productivity into the network.

We are controlling what we can control. We produced quarterly records in freight revenue and operating income and a best ever record in freight revenue excluding fuel. And I'm confident our 58.1% adjusted operating ratio will be industry leading. Kenny summarized second quarter volume and revenue drivers and discussed his thoughts for the second half of twenty twenty five. Unknowns remain, but we are focused on outperforming our markets and pricing to the value we're providing our customers.

The second quarter surge in coal and our ability to seamlessly handle it demonstrates the value our buffer of resources provides as we compete and win business. Next, Eric reviewed our strong operating results. Safety metrics continue to show great improvement as we strive to lead the industry and bring our employees home safe. Operationally, the network is running at a very high level, delivering on our service and operating plans. We will remain agile and ready to handle whatever comes our way.

Wrapping up, we remain committed to the long term guidance that we laid out at our Investor Day last September. You see that in our results and in last week's dividend increase. We are confident we will remain the industry leader as we drive value for our shareholders. The foundation is built. We are growing with our customers and we have strong momentum as we continue to maximize the value of this great franchise.

In addition to today's earnings release, we also just announced that Union Pacific and Norfolk Southern are engaged in advanced discussions regarding a potential business combination. There are no assurances that we'll reach an agreement, but we are talking. We will not comment any further until there's something to disclose and we will not take any questions relating to this topic during the Q and A. With that Rob, we're ready to start the Q and A. Thank you.

Thank you, Mr. Vena. We'll now be conducting the question and answer session. And the first question today comes from the line of John Chappell with Evercore ISI. Please proceed with your question.

Thank you. Good morning, Jim. That's quite a curveball with the press release and not taking any questions about the thing everyone's going to ask you about. So let me phrase it this way and you can answer it how you so choose. Everything you just laid out before the mention of the press release is everything you said you're going do and you're going to join.

The momentum is amazing. The OR is best in business, pricing, balance sheet, everything is working the way it's supposed to and you're doing this in a very tough freight environment. So why now potentially take a multiyear distraction that could potentially sidetrack the organic momentum that you're already building?

So why don't we back up a little bit in time because I think you have to think about things in time and place. So I've been involved with Union Pacific with a short little time when I was on sabbatical as I describe it since 2019. And since 2019 it was a journey to be able to have a team which I'm very proud of the team that's sitting here with me and everybody that works at Union Pacific to fundamentally drive the efficiency, drive the productivity, drive that customer focus, drive the capability to deliver and sell and be able to move products at a high level for our customers in an efficient manner. If we look forward, truly it's we look possible and what's better. And that's what this is all about.

This is everything else in the world is moving ahead technology wise and fundamentally going to change. So I've been railroading for maybe way too long and I remember when there was five people on trains and there was four and three. I also remember when locomotives couldn't communicate and we could not run-in train power. If you stand still, you get left behind. So I love where we are because if you fundamentally have a railroad that's operating the way we operate and the way we can react then you can do things that help the nation, help our customers win and that's what it's all about.

So sorry for the long answer but I thought I'd frame it for you.

The next question is from the line of Brian Ossenbeck with JPMorgan. Please proceed with your question.

Hey, good morning, Jim. Good morning, team. Thanks for taking the question. So I think I'll just ask more of a philosophical one for you, Jim. We've seen efforts to give shippers options like reciprocal switching over the past the quarter, obviously, just remanded that back to the STB.

But what's your view on just conceptually the reciprocal switching open access giving shippers more options maybe in exchange for the news you just announced? And you've also talked about the rail industry hasn't done a great job for intermodal growth in the past making some tough decisions. I wanted to see if you had some further comments on that maybe a direct to shipper offering at some point. So that's a lot of theoretical stuff but appreciate your thoughts on that Jim.

Thank you. So who are we at Union Pacific? Okay. I can't talk about the industry in general. The people I think have very similar goals.

We want we know that if we provide service at a high level and the service is what we sold the customer. We have a range of customers that need different types of service. Some need speed, some need consistency, some need storage, some need additional. But everything that we do from the technology we put in place to make it easier to enter faster into our intermodal facilities, faster being able to trace cars, being able to tell where all their equipment is, working on innovative solutions is that's how we win. And nothing changes.

It doesn't matter whether it was two weeks ago or today, nothing changes in what we think we need to do to continue to grow this and absolutely help the country. The more we can move off of highways onto our railroad, the more we allow our customers to be able to win in the marketplace by giving a tie in with them and have that service and product where it should be is a win. So that's the way I look at it Brian. Hopefully, you can see the philosophy that we all have here.

Yes. Appreciate it, Jim. Good luck. Thank you.

The next question is from the line of Chris Wetherbee with Wells Fargo. Please proceed with your question.

Good morning, Jim. Thanks for taking the question. I guess about a month or so ago, I think in a public forum, you noted that you'd only do things that you thought were possible. And I guess just maybe big picture as you're thinking about the industry moving forward here, I think your comments were interesting about not standing still. I guess when you think about what's possible, is this the landscape that would allow changes to occur, whether it be from a shipper perspective, from a technology perspective, from a regulatory perspective?

I guess we're just trying to get a sense of how you see sort of the receptivity of the other stakeholders industry as you think about what Union Pacific is trying to accomplish over the next several years?

I think it's a great question and I do talk about what's possible and that's the way we think here at Union Pacific is. And if you take a look at what we've done, we don't look at and we never have. But we're very, very diligent in going through any decisions that we make. And I can go back in my time here and I could go back to my time to the other great railroad that I worked for Canadian National Railways, okay, great company, great franchise. And when I came here and the team we decided that what we wanted to be able do is make sure that we make smart decisions how we move ahead, how we operate, how we sell and Kenny does that in his team every day.

And Jennifer keeps us grounded. She's some of the discussions you would find very interesting on making sure that we are driving to the best decision possible. But that's who we are is if we can fundamentally operate a railroad in a safe, provide great service and be operationally excellent then we can look at what's possible and decide what we want to do next. We never take decisions lightly. We do not flippantly wake up one morning and say we're going to do something like we just announced that we're in discussion And we thought about it yesterday.

We've done a lot of homework to get us to this place. And I'm not going to comment. Nobody would expect me to. Only a fool would expect me in the middle of when we're having discussions to start getting into any details. So and none of you are fools.

I've met you all. You guys are smart people. So at the end of the day, I'm very comfortable where we are. We're diligent on decision making. We thought it was prudent for us where we were and to be fully tell our shareholders and everybody exactly what we're where we at this morning after the quarter that we had and we're moving ahead. So thanks for the question.

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

Hi, good morning. Thank you. Can you hear me?

I can hear you clear. How are you this morning? Great.

I'm doing very well. Maybe I'll I figured if

I ask you questions, you won't ask me a question. We'll do it two ways. Go ahead.

You're more than welcome to ask me whatever questions you'd like. Well, Maybe I'll jump away from the topic, Djur, real quick here. I wanted to talk a little bit about the rail itself. I mean, you've made tremendous progress. The network is working about as well as it has.

So as you think about the back half of the year and you talk about really the cost performance as we go from 2Q to 3Q, if you wanted to share any puts and takes about anything that might not continue from the second quarter into the third quarter and the same time how we should think about maybe some potential benefits as we look to the back half of the year and ultimately hitting that full year target? Thank you.

You know what, you guys are probably getting sick and tired of listening to me already. So I've got a couple of people here that can give you a real wholesome view on it. And all three of you please jump in. But Eric, why don't you start about what you see second half? What you're thinking about operationally?

What's possible? And Jennifer and Kenny, you guys want to jump in? Away we go. Okay.

Yes. So two quarters in and certainly in this quarter, we're already demonstrating a very high level of productivity and certainly a very high level of service to our customers. When you think about the second half and as we think about how we're going to execute that, the game plan really isn't different. We've got a great team executing against some very challenging goals, and they're delivering on those goals. Now we're looking for opportunities always.

It never ends. That perpetual dissatisfaction that I've spoken about before, that's our mindset or seeing what's possible. So I still see opportunities in how we think about improving service from a dwell perspective, which also has the benefit of driving efficiency to make Kenny even more competitive in the market with this team. I still see opportunities in the locomotive dwell side. We set a second best record ever in the second quarter at fifteen point four hours.

There's no reason that can't be below 15, and the team is up against that. Even outside of the core transportation team, it's about how we think about automation within engineering and mechanical. So the plan isn't different. It's to continue to be safe. It's to continue to give good service.

And it's continue to find new and inventive ways to be efficient.

Yes. So I'll go through a few things I mentioned in my script. Certainly, expect for our coal business to be up significantly. We're looking at grain. We've got a great harvest out there.

We'll see where the demand takes us. I like the fact that our network and Eric has a network that we can move wherever the grain and traffic flows take us. On the industrial side, I'm excited and pumped up about the wins that we have in the marketplace. We're winning as our customers are expanding on us and they're aligned with the investments that we've made in The Gulf Coast. On the premium side, the fight will be on international intermodal.

And bottom line is we've got to backfill that volume and some of the ways we do that is on the domestic side. And I'll tell you, when you have a strong service product like we have, we're going to introduce new products. We're going to introduce a seven day a week service from Tacoma into Chicago. We're going to introduce a seven day a week service from Memphis to Dallas. We're going to introduce the Kansas City Intermodal Terminal.

That's the fourth one in the last few years. So when you got a strong service product and you're introducing what we're doing, I feel really good about where we expect to be.

Yes. So Stephanie, Eric and Kenny both hit great points in terms of the railroad's running really well. Kenny and his team are out there executing. We called out the one timer that we have relative to the expense line with the labor agreement. Certainly, that's not going to repeat itself as you're thinking sequentially second quarter to third quarter.

So all really good progress and feel really good about those things. The only thing I'll remind you of and we've talked about this before is that this is going to be a little bit of an unusual year for us when you think about the volume cadence. Usually, you have your stronger volumes in your third and fourth quarter. Because of the strong comp that we have with the international intermodal and how we see that trending, that's likely not going to happen. In fact, we're expecting some sequential declines through the back half.

But set that aside, the team is executing at a very high level, and we'll continue to do that. Thank you very much.

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

Yes. Hey, Jim. So I want to see you since you had the Trains magazine article back in May, you really had a dramatic impact on the discussion on consolidation. There's been enough time, I would imagine, some of your good contacts and buddies in the customer and shipper side have reached out to you and probably given you some feedback. Can you offer any thoughts on kind of what the flavor of that feedback is?

Or shipper is gravely concerned? Are they mechanical shippers? Are they excited about maybe intermodal shippers? Are excited about a transcon railroad? Is there anything high level you can give us on just kind of initial shipper response over the last couple of months? Thank you.

So Tom, we deal with our unions and our employees all the time. And we decided this round to have direct negotiations and we've signed up close to about 36% now of our employees are signed up or have a tentative agreement. And that's the way our relationship is with our employees. We want our employees to come to work, deliver. We need them to work and be very efficient.

We give them everything we can to make sure that they work in a safe manner and all the training necessary using technology. So that's how I look at the labor and Union Pacific. It's a real positive place and we're moving ahead just like we want to under all the agreements that we have. Appreciate the question. Yes.

I think I was really asking more about shipper feedback on potential Yes.

Tom, I said it from the start. It's pretty clear. You never negotiate publicly. I think we came out and we're very specific in what we said this morning and that's about all I'm going to say. I'm not going to get into any other detail when you're in the middle of negotiation.

I don't know about you guys, but the last time I looked when I went and bought a home and I've only moved like 19 times, I don't go tell everybody on the street what I'm thinking and where I am and what I'm going to pay or anything else. You're in negotiations. So it's advanced negotiations which is good, but that's it. It's as far as I'm going to say Tom, okay?

Next question is from the line of Bascome Majors with Susquehanna. Please proceed with your question.

Good morning, Jim. As you look out long term, UP has been pretty committed to the modification approach to refreshing your locomotive fleet over the last three years. Is that agreement which I believe predated your arrival Jim comes to an end here in the next couple of quarters. How do you feel about the fleet today? What are your intentions and desire to continue refreshing it longer term?

And does a combination make that a little more complicated than it would have been otherwise? Thank you.

So let's start with reminding ourselves that it takes five critical assets, five critical resources to run this railroad and locomotives is one of them. So what you always want to make sure you're doing, and we do it every single day, is to ensure that, to your point, we're making the proper investments in our locomotive fleet. And to be clear, we are. As we look at the modernization program, that's one part of it. It's a very important part of it.

It's what allows us to continue to improve reliability, renew the fleet, deliver fuel improvements as well as greenhouse gas emission reductions. But we also have our overhaul program, which is another way to keep our fleet in a specific operational order that runs efficiently, runs reliably. We also have investments that we make every single day in our shops when we do modifications to the locomotive. So as I look out, all three are going to remain very important. Now the distribution of where we spend in those three buckets may change based on the condition of the fleet or the mix of traffic, but all three are critical components for us to deliver a consistent and reliable service product to our customers.

Union Pacific (UNP) Q2 2025 Earnings Call Transcript

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