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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, welcome to the Union Pacific Second Quarter 2026 Earnings Call. At this time, all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. As a reminder, this conference is being recorded, and the slides for today's presentation are available on Union Pacific's website. It is now my pleasure to introduce your host, Mr. Jim Vena, Chief Executive Officer for Union Pacific. Thank you, Mr. Vena. You may begin.

Thank you, Rob. Really appreciate it. Listen, pretty special day here today. Great day to be putting our results out for the second quarter. It's my wife's birthday, so it's a double win. She would've complained big time if this quarter wasn't good, so let me just highlight how it is moving forward. She might've been mean to me today. Why don't we get started? Here with me today in Omaha is our Chief Financial Officer, Jennifer Hamann, our Executive Vice President of Marketing and Sales, Kenny Rocker, and our Executive Vice President of Operations, Eric Gehringer. Good day to railroad out there. Weather's good. Little storm coming in, nothing we can't handle. Right, Eric?

Perfect. Let's review the highlights on slide four. This morning, we reported record financial results driven by strong execution and 2% volume growth. Net income totaled $2 billion. Earnings per share after we adjust for merger costs grew to $3.41. There was a lot of in and outs as we compare our performance against last year. Fuel was a big driver of both surcharge revenue and expense this year. We had some one-timers we called out last year. What's real important is when we remove all of that, we see solid core improvement in our results with growth in revenue and operating income. We were about 10 basis points better on our operating ratio. The team will walk you through the quarter in more detail. I'll come back and wrap it up before we go to Q&A. I'm very excited this morning on the Q&A, looking for some great, smart questions from our smart analysts and owners. We'll start with Jennifer and the second quarter financials. Jennifer?

All right. Thanks, Jim, and good morning, everyone. Let's begin with our second quarter income statement on slide six, where operating revenue of $6.9 billion increased 12% versus last year, and freight revenue also grew 12% to $6.5 billion. Breaking down the drivers of freight revenue, volume growth added 225 basis points. Fuel surcharge revenue added 750 basis points and increased roughly $460 million, reflecting the impact of higher year-over-year fuel prices and volume. Solid core pricing combined with business mix to drive 175 basis points of freight revenue improvement. Importantly, our quarterly pricing dollars continue to exceed inflation dollars as we compete and win business at levels that reflect the value of our rail service.

I also want to call out that second quarter business mix was a slight headwind in the quarter as growth in domestic intermodal outpaced expectations and offset the mix benefit of less international intermodal traffic. Wrapping up the top line, other revenue increased 11% to $346 million, as higher volume drove increases in both subsidiary and accessorial revenue. Turning to expense, our appendix slides provide more detail as total operating expenses increased 13% to $4.1 billion, primarily from higher diesel fuel prices. Compensation and benefits expense improved 1% against last year's reported results, which included the final brake person buyout agreement of $55 million. Excluding that agreement, second quarter cost per employee increased 7%, driven by higher wage and benefit costs. A key driver to offsetting wage inflation is workforce productivity, and we have delivered eight consecutive quarters of record results.

Although we're confident we'll continue that productivity trend, we now expect full-year compensation per employee to increase around 6%. Fuel expense grew 63% on a 60% increase in average fuel price and 2% higher gross ton miles. Year-over-year, our price per gallon grew from $2.42 to $3.86 and added 120 basis points to our operating ratio. Purchase services and material expense increased 10% due to merger-related costs as well as higher intermodal and subsidiary expenses. Despite increased volume, fewer operating equipment leases and record second quarter cycle times drove a 7% reduction in equipment and other rents. Other expense grew 13% on higher casualty costs. Income tax expense increased 29%, reflecting last year's one-time $115 million deferred state tax benefit and higher pre-tax income this year, partially offset by some good news in 2026 from state taxes.

Put it all together, we had a record quarter with reported earnings per share of $3.36. Adjusted for merger costs, our earnings per share totaled $3.41. Operating ratio was 59.2%. Turning to cash and returns in the balance sheet on slide seven, our strong financial results carried forward into cash from operations of $5.5 billion, up 21% versus last year. Free cash flow totaled $1.8 billion after we reinvested in our network and returned an industry-leading dividend to our shareholders. We also paid down $1.5 billion of long-term debt in the first half of the year, resulting in an adjusted debt to EBITDA ratio of 2.5x. Turning to our outlook on slide eight. We have delivered a very strong first half 2026 as we execute on our strategy and deliver improvement in safety, service, and operational excellence, leading to carload growth.

From that focused approach, we have generated reported EPS growth of 6% year-to-date, in line with our January outlook. Looking to the remainder of the year, we are raising our 2026 outlook to reported EPS growth in the high single-digit range as we continue to efficiently move increased volume on our network. We also expect to continue delivering operating ratio improvement and maintain our position of industry leadership, even against ongoing margin pressure from fuel. Fuel prices remain volatile. Our recent purchases have been over $4 a gallon. Overall, a strong first half of 2026, coupled with an improved outlook, highlight our ability to grow volumes, deliver for customers, and manage costs, a strategy that delivers value for all of our stakeholders. With that, I'll turn it over to Kenny.

Thank you, Jennifer, and good morning. We had a very strong second quarter as freight revenue grew 12% to $6.5 billion. If you exclude fuel surcharge, grew 4% to $5.5 billion. Both were best ever records. Let's walk through the key drivers on slide 10. Starting with our bulk segment, revenue was up 7% compared to last year on a 1% decline in volume. Grain and grain products had double-digit volume growth in the second quarter, driven by strong export demand, facility expansions, and growth in renewable fuels and associated feedstocks. That resulted in record second quarter volume and revenue. Meanwhile, coal volume was challenged by weaker natural gas prices, mild weather across our served locations, and customer downtime. These factors adversely impacted overall demand. Shifting to industrial, revenue was up 8% on a 3% increase in volume.

When you exclude fuel surcharge, strong core pricing gains delivered record freight revenue and average revenue per car. Petrochemicals growth was driven by improved demand and new business. In metals and minerals, volumes rose on higher domestic steel production and business development wins, more than offsetting the ongoing weakness in the export soda ash market. Premium revenue for the quarter increased 21% on a 4% increase in volume and a 16% increase in average revenue per car, reflecting higher fuel surcharge, core pricing, and improved business mix. Domestic Intermodal delivered its fourth consecutive record quarter in both volume and revenue. It's evident our outstanding service set the foundation to grow the business. That's exactly what we're doing. In the second quarter, private asset, rail asset, and parcel volumes were all up double digits, benefiting from constrained truck capacity and share gains.

Our buffer resources allowed us to respond quickly to increase customer demand. International Intermodal volume was down 14% versus last year. However, we saw improvement as we closed out the quarter, driven by stronger West Coast import volumes. In automotive, results were positive despite market softness due to strong business development results. Looking ahead on slide 11, Grain & Grain Products is positioned for further second half growth, driven by strong export demand, ongoing business development, and new facility openings. I'm excited about AGP's new export facility that opens next week in Grays Harbor, Washington. We also see continued upside from growing renewable fuels and feedstock markets, supported by greater policy certainty. In coal, elevated inventory and lower natural gas prices will make for a challenging second half.

We will continue to watch this market closely. Eric and his team have proven they can quickly flex to handle shifts in volume. Business wins are also helping to offset some of the market-driven declines. Moving to industrial. We still see a soft housing market, but we remain firmly focused on winning new business and outperforming industrial production. We expect continued strength in metals, growth from industrial development efforts, and increased petrochemicals from customer wins like the startup of CP Chem that I mentioned last quarter. Wrapping up with premium, we expect domestic intermodal to continue to perform very well, supported by over-the-road conversions and our service product. International intermodal will fully lap last year's tariff volatility in August, and we expect volume to be positive in the second half. For automotive, we expect new business to offset market weakness.

While we're proud of the record second quarter, the team is focused on capturing the opportunities ahead. Our approach does not change. Price for the service we provide, invest for growth, and keep winning new business. With that, I'll turn it over to Eric.

Thank you, Kenny, and good morning. We delivered record second quarter operating performance, ran a fluid network, and improved safety, all while handling 2% more volume. It all starts with safety. Both employee and derailment rates improved versus their respective three-year rolling averages, highlighting the team's dedication to critical safety rule compliance and human factor prevention initiatives. Moving to slide 13. We provided exceptional service as freight car velocity increased 5% to 231 miles per day and set a second quarter record. Train speed increased 3%, and terminal dwell improved 7% as we tied our first quarter record of 19.7 hours, our third straight quarter below 20 hours. Both the Intermodal and Manifest service performance index finished at 95%, demonstrating our ability to execute on the fundamentals and effectively utilize our buffer of resources. This enabled the team to support double-digit domestic intermodal growth at very high service levels.

Remember, this bar only gets harder for us as it resets based on monthly bests, which we achieved in 2025. Opportunities remain to improve, and we are committed to providing consistent, reliable service while growing with our customers. Moving to slide 14. Our key efficiency metrics reflect our commitment to operational excellence as we delivered record workforce productivity, record train length, and record fuel consumption. The team is relentlessly focused on identifying opportunities to further enhance service, productivity, and efficiency across the network by first executing on the fundamentals, then implementing new technologies, and finally, investing prudently back into the railroad. Locomotive productivity of 142 improved 1% as the average active fleet decreased 1% against 2% higher gross ton miles. We successfully onboarded incremental volume by leveraging existing train starts, demonstrating strong asset utilization and efficiency.

Our fuel consumption rate improved 1% as we continue to benefit from fuel conservation initiatives and locomotive technology and modernization investments. Workforce productivity increased 5% on 2% higher volume. Our active train engine and yard workforce decreased 2%, demonstrating our discipline and remaining more than volume variable. Finally, train length grew 2% versus last year, driven by continued optimization of the transportation plan and reduced train starts. Closing the quarter, we delivered on the fundamentals while growing volumes and effectively serving our customers. As Kenny's outlook has improved, we've been agile and re-examined our base resources and buffer, aligning both to support growth. We are also continuing to make strategic capacity investments, including the Houston Complex, Pacific Northwest Siding Extensions, and Sunset Double Track projects.

The operating team is demonstrating daily that we are ready to grow with our customers while delivering the service we sold them. With that, I'll turn it back over to Jim.

Thank you, Eric, Kenny, Jennifer. Why don't we turn to slide 16? Before we get to your questions, I'd like to quickly summarize what you've heard and provide an update on our merger with Norfolk Southern. As the team walked through, we had a very strong second quarter as volumes, pricing, and operational efficiency drove record financial results. The network continues to be very fluid, and our buffer of resources is supporting broad-based growth. Looking ahead, we are prepared to meet increased customer demand with best-in-class safety, service, and operational excellence. For our 2026 outlook, we are raising to full-year reported EPS growth in the high single-digit range. As to the status of our merger with Norfolk Southern, first, we met a very important milestone when the Surface Transportation Board accepted our application as complete on May 28th.

On Monday, we will meet another important milestone when we complete the supplemental information asked from the Board. As you'll see when you read it, we've carefully answered each of the Board's questions. We've also taken the opportunity to further improve the competitive nature of our merger through an expansion of Committed Gateway Pricing, among several other voluntary commitments. This is in addition to the merger benefits of seamless single-line service, better reliability, lower costs, and greater competition against trucks and other railroads. Also yesterday, we announced that we reached a merger settlement agreement with the railroad I used to work for, Canadian National. I said from day one that our merger will create a stronger railroad industry that delivers better service for customers. Our agreement with CN, Canadian National, reinforces those commitments. Our merger is unprecedented and deserves a careful review. We've done our homework.

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 and will deliver benefits for our stakeholders, especially our customers. The case for our transcontinental railroad is clear, and we're ready to go. With that, Rob, we're ready to take questions.

Thank you. We'll now begin the question and answer session. If you'd like to ask a question, please press star one on your telephone keypad and a confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to withdraw your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Due to the number of analysts joining us on the call today, we'll be limiting everyone to one question to accommodate as many participants as possible. Thank you. The first question is from the line of Ken Hoexter with Bank of America.

Hey, good morning, Jim. I guess, a two-parter. One, a little confusion on the $0.14 fuel gain. Is that just all upside from fuel and the pricing? Maybe if, Jen, you could just delve into that a little bit. If you can expand on the commercial agreement with CN, the access to the EJ&E, maybe talk about what that gives you and what you're giving up on the network down south.

Ken, on the fuel piece, we're just calling out the fact that it did have the 120 basis points headwind to our operating ratio mathematically. When you look at the difference between expense and surcharge, the benefit there was the $0.14.

On the Canadian National announcement yesterday, it was in two parts. The one part was something that we knew that we wanted to make sure. We said it right from the start, what we looked at with the merger, that we needed to do something. We told the Surface Transportation Board twice that we never wanted to take control and get over 50%. In fact, we called meetings at the TRRA. The other railroads didn't show up. At the end of the day, the nice part about the deal is that clears that up as far as ownership, the Kansas City terminal and TRRA.

It also allows Canadian National to come over between St. Louis, just east of St. Louis to Kansas City, and give optionality to the customers in an old area, because we would have ended up with the two rail lines that we use in directional, and we would have had another one. We thought it was prudent for us not to be too concentrated. Ken, that was the only part of the company where we have a significant overlap, and that was a pretty small area when you take a look at the entire railroad. With Canadian National, we've got an MOU that takes care of that. We also talked about, and it goes with our commitment to keep every gateway open.

Canadian National says, "Listen, can we figure out a way to get into Mexico to be able to move traffic, we could still use Chicago if we wanted to, but we want to be clear that we could use a priority location that they find better to be able to have access into Mexico," and we worked out a deal. For that, we said, "Listen, we want better access through Chicago, east to west." Sometimes people look at things in the short term instead of long term, and they don't understand. Listen, I've worked in Chicago, and I worked at Canadian National, where it took us longer to get a train from the north side of Chicago to the south side of Chicago, where our terminal was, than it did to run it from Prince Rupert to the northern part of Chicago.

Anytime a railroad can figure out a way to be able to run much more seamless east to west to make interchange connections or run through trains, that's what we've done. It's a win-win. It's a win for Union Pacific, and it's also a great position for Canadian National. I think it's a deal that is going to help both of us be able to increase traffic from both of us because of what we're able to take off the roads and move more of it on the rail. Ken, maybe you didn't want that much detail, but I just gave it to you, okay?

No, I appreciate it. Have a great birthday dinner night. Thanks, Jim.

You bet. If I'm good, I'll take her out. If she's good, I'll take her out. If not, we're just ordering in McDonald's, okay?

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

Maybe sticking on that topic, I guess I just wanted to see if you could expand a little bit on how you think this plays out, both from a revenue synergy perspective. I think there's initially, in the initial merger agreement, there was some concessions baked in, several hundred million dollars of potential concessions. Maybe thinking about this agreement that you've constructed and how it may influence some of the revenue synergies and concession numbers, and then maybe a bigger picture, is this the first of what could be multiple of these types of arrangements? I guess, how do you feel about the receptivity of the rest of the rail industry? This is a big move coming from potential opposition to agreement to get on board with the deal. I just want to get a sense of how you see the landscape right now.

Listen, Chris, I won't get into too much detail of some other discussions we've had, but I'll tell you that if people are reasonable, we are more than willing to come, and this one is a reasonable expansion for Canadian National, and it's great for Union Pacific. As far as the impact, listen, we knew we were going to have to do that. We see this as, for both of us, a growth story, not a limiting factor on business. This will not impact what we're doing. Remember, we're still going to have to have them operate on our railroad to get to Mexico. What it does is it makes them much more competitive against Canadian Pacific Kansas City.

They're able to originate out of Canada and compete head-on and sell a direct link, we see that as them being able to grow more business and not be less, that we should be able to get more revenue on trackage or whatever else that we do and how we finalize the deal. It's a real positive, Chris.

I would just say a big part of it, which is addressing the 3-2, 2-1, as well as access into Kansas City, was all part of what we knew we were probably going to have to do something to address that. All part of our thinking.

Perfect. Thanks for the time. Appreciate it.

The next question is in the line of Walter Spracklin with RBC. Please proceed with your question.

Good. I know, Jim, as you mentioned, you worked a lot on the EJ&E, certainly when we first met and some of the loop arounds and efficiencies you get and as you translate into the Transcon solution is quite compelling. Curious if whether, when you were talking to CN, does this open the avenue now for more cooperation with CN? Is this something, okay, we've addressed this now with CN, let's move on to any of the other railroads? Just curious whether you're seeing this as, okay, that's one player we've addressed, and now we move on, or is there avenue for further opportunities with CN that might have come up in the conversations?

Listen, let's start with, fundamentally, we would have never been able to get to this kind of deal with Canadian National if it wasn't because of going through the merger. Okay? That's the problem with people, anybody thinking that it's easy to make a deal with another railroad or another company is, Walter, pretty tough. Okay? It was the merger that drove this, and it was something that helped us and helped Canadian National. It truly is a win-win. I'm not sure what the next step is. Okay? I really don't. Would I like to make a, the problem we have is, because we do not have a whole bunch of overlap, we've basically dealt with our 2-1 and 3-2 customers even. There isn't a lot else that we need to give up. What is it that you give?

You give access to somebody around Nashville? Well, we'd like access to Florida, further south in Jacksonville. At the end of the day, it's going to be difficult, but we're always open to have discussions. We really are. If something happens, and I love our relationship with Canadian National, but I'll tell you, they don't give me any deference because I know their railroad. I'll be honest. They're tough negotiators. Son of a gun. Okay. I was hoping I didn't have to give them that much access into Mexico. At the end of the day, they're tough negotiators. They're smart. I like that. That's what you want, Walter, is to be able to move the deal forward together. If there's other things that we can figure out how to do, we'll do that. We really will.

I don't see a whole bunch of things that are sitting on the platter. Walter, because I think you've met my wife, you know I would never take her out for a burger, okay? Sometimes I like having a joke. The chance of me having a marriage for 43 years like I have, or 44 years, and take her out for a burger for her birthday, that would not work out good, okay?

Yeah. McDonald's is not on the menu. I got it. Okay.

We're in Omaha. It could be like a nice steak from Omaha. I'm telling you. Nice Wagyu from a farm out in Iowa or Nebraska. I'm looking forward to it tonight.

That might play out a bit better. Okay. Thanks again, Jim.

The next question is in the line of Jonathan Chappell with Evercore ISI. Please proceed with your question.

Thank you. Good morning. Hey, Jim. Jennifer, shifting gears away from the merger for a second. You raised the EPS guide versus three months ago, while also raising the outlook for your most important cost line item with the cost per employee. Can you help us solve then for where the majority of the upside's coming from? Is that volumes running better than expected? Is it surcharge tailwind benefiting you more than you thought in 2H, more productivity in other line items? How do we rectify those two changes?

Yeah, I think you answered your own question there a little bit, Jonathan. It really is a number of different things. Certainly, when you hear Kenny talk and look at his outlook in terms of how the business is performing and what we see the opportunity for the second half of the year, it's stronger than when we thought it was coming into the year, which is great news, and we feel very bullish about that. Then you see how Eric and his team are handling that increased volume, doing it very efficiently, very cost efficient manner, and giving a great service product to support our customers as they're growing their business. It's all of those things, and we feel great about it. It's a great setup for the first half and looking forward to a strong second half.

The next question's in the line of David Vernon with Bernstein. Please proceed with your question.

Hey, good morning, guys. Thanks for fitting me in here. I'm going to try to squeeze two into here because you guys are quick on the next question, Mike. The first question is really around the outlook for the second half. Kenny, you sound pretty positive about everything except coal, which sounds like a throwback to last decade. I wanted to ask if you're seeing any sort of broadening of industrial demand outside of anything related to data center construction, anything that you're seeing in the economic tea leaves that would tell you that we are starting to see some broader industrial recovery building up. And then the second question would be around the Falcon service, right? How does this agreement change that? Or is CN going to be running some of its own trains? Or is that totally separate from what you guys announced today? Thank you.

Yeah. The first question. We look at car orders, and we're at 100% fulfilling those, and those are up slightly. Yes, if you look at it broadly, if you look at the car orders, I'm talking across the board, there is some slight uptick that's there. You're also seeing that in the momentum that we talked about on the industrial side. That's largely a lot of our carload business, where we've had a record Average revenue per car and candidly, record revenue that's there. That's encouraging to us as we move and turn into the second half. There are some things that we're doing that make our life a lot better. You look at grain and grain products, we've got a few more facilities that are coming online, some that are export, some that are domestic. Automotive, it's not a great overall macro area, but we've won new business to go out and compete in that area.

A little bit of a macro bump on the industrial side, but also, we're balancing that and supplementing that by winning new business. I think the second question was around the Falcon. Our Falcon product with CN is going well. The service product is strong. Eric, you've really helped us out on CN there. As we look at Mexico again, and you can see the numbers, Mexico, we've done well in Mexico, and we see that occurring as we go through.

Kenny, sorry for interrupting, or Eric, you guys should talk about, we've talked about open gateways and the Falcon was through Chicago, but we have no problem with making sure that the other railroads come to our network and move the way that customers want it to move.

When we think about the Falcon, it is independent of this. To Jim's point, our commitment as part of the merger, which has remained unchanged and will remain unchanged, is full access to all the active interchange points. When some people think about that, they underestimate, when I say interchange points, they think of places like Chicago and New Orleans, which are obviously incredibly important to us and all the other railroads. Just remember that every single day, there's 260 interchange points across the Union Pacific network as we sit here today. We're really committing to that 260 open interchanges, just like they were yesterday, just like they were a month ago, and that's going to remain that, because to Jim's point, our partnerships with all of the railroads are incredibly important when you consider 40% of our volume every day is interchanged to another railroad or received by us from another railroad.

Our next question is from the line of Stephanie Moore with Jefferies. Please receive your question.

Hi, good morning. Thank you, guys. I guess I wanted to maybe ask a bigger picture question here, for whoever on the team would like it. I wanted to ask a little bit about just maybe the reindustrialization theme that we're seeing across the U.S., maybe that means a bit more domestic manufacturing and maybe less imports coming onto the West Coast. Can you maybe frame how you think the network is positioned to handle what could be a pretty big medium-term theme here over the next five, 10 years? Thanks.

Kenny, why don't you talk about what you see with all the construction, different products, hot markets, cooler markets real quick, and then Eric, talk about the railroad and how it is.

Yeah. Stephanie, you're really asking about what we call our industrial development area, where we're either expanding at a plant or locating a new customer on our network, and that pipeline has remained strong. We've seen a lot of new customers come onto our network. I talked about AGP, which is a grain customer, but then we've also seen it with Hyundai Steel that's bringing on new production here in the U.S. into the Gulf. That pipeline is strong, and we see it show up in other areas. Someone talked a little bit earlier about the data centers, but we're seeing really good strength, really good pipeline. We're converting that at a great rate. We're seeing a robust number of RFIs, meaning our opportunity to compete in that area. We're bullish and we're excited about that. We've been able to convert on that.

Stephanie, as far as the railroad's ability to handle it, we are, and we remain poised to be able to handle that growth. You saw that, a couple examples here recently. You go back to last year with the 33% increase in international intermodal, and we handled it. We handled it well. You look at what's happened in the domestic intermodal market, which credit to Kenny and his team, they've done a great job bringing that growth to our railroad, and you've seen us handle that exceptionally well, especially when you see 5% increases on car velocity in a period of the year where historically, no matter how many years you go back, we actually would degrade by about 15-20 miles per day. 50 days into the summer, we haven't had any degradation, and we don't plan to have any degradation.

That really tells you that the fundamentals of the railroad are strong. Every single metric I gave this quarter, last quarter, the quarter before that indicate that we're not only strong, but we continue to make more progress. On the capacity side, to be able to handle that, and you used examples like the West Coast and Mexico, think about what we've been doing, and this is not a new thing. We've always invested in our capital, invested that into the railroad prudently.

Whether you're thinking about the more than $125 million we've invested in our Houston complex, whether you think about our continued work to finish double tracking the Sunset Route from Yuma all the way to Tucson so that we're actually double track all the way to El Paso, and even on the bulk side and the manifest side, when you think about our siding construction projects and siding extension projects up in the Pacific Northwest and across Iowa, we are poised, we'll continue to be poised, and we'll continue to maintain a buffer so that when unexpected growth comes because of all of Kenny's team's hard work, we can bring it onto the railroad with an immediate yes to our customer.

Yeah. Just one last thing to add there, Stephanie. You've heard us talk about our pipeline of industrial projects where Kenny mentioned the RFIs. We've got about 200 of those in the pipeline today. It's a very strong pipeline, we feel very bullish about our opportunity to continue to grow there.

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

Yeah. Good morning, Jim. Congratulations on this deal with CN. That seems like a really nice step forward for you in terms of making the case with STB. I wanted to ask you, just for a little more kind of understanding on how you would view that deal. Can you give us any kind of framing of, we say, 3-2, 2-1 customers when you consider the customers on St. Louis to Kansas City or in St. Louis area that are seeing, getting access to, how large is that group? Is that five customer facilities? Is that 50? Is there any way to kind of frame that? I guess the other component would just be their access to your line on Memphis to Eagle Pass. Would you expect CN to compete with you on business to and from Mexico?

Is that like, hey, this is going to really enable them to compete with CP on business? It's more like, call it, Eastern Canada to Mexico. Just want to see if you could give us a little bit more perspective on how meaningful that is, and how you think it affects the competition.

Okay. The new deal is Canada to Mexico, so it's not competitive with us. It's good for both of us. It allows them to sell it. Second is as far as the number of 3-2 and 2-1, it's in the application, Tom, it's absolutely a small number. Out of the thousands of customers we have, we're talking about a couple of handfuls, if that. Jennifer, what's the exact number? I don't want to put the wrong number out. It's being a freaking moving target.

Yeah. The 2-1 is three or four. The 3-2, I think is low 30s.

Right. That's it. Out of all our customers, we said that we would fix the 2-1s, we have a remedy even for the 3-2s, which truly is, let's get serious. If somebody has two plus a truck or two, they should be competitive, but we want to make sure that there's no question about leaving every optionality that people have. Tom, I'll take exception to one thing on yours. It's pretty straightforward. This merger doesn't need a lot of help. Okay. I've been pretty adamant about this. What people are missing is when you give customers a seamless single point railroad that can move things a longer distance, that just automatically makes the thing less expensive for the customer and more competitive against any other product that's out there.

People want to make noise about whether we need to help this. I think the CN deal, the Canadian National deal, is great for both of us with EJ&E and Mexico and then within the piece. We're talking a small number of customers. This is a growth deal. We see taking trucks off the road to go across the U.S. faster and take things that are right now going through cities and less fuel efficient, more greenhouse gas, impacting roads, that, of course, everybody knows trucks do not pay their full share of the construction and capital costs on the interstate system while we pay for all ours. We want to put them on our railroad. This is truly more compelling today than we looked at it than ever before. Think about that.

Less than 10 customers go 2-1. This is truly an end-to-end that wins. We think we have a strong case. People, they can write stories that aren't factual, can say whatever they want. The facts are pretty clear. You got me going a little bit this morning. Good morning.

Jim, do you think you'll get a shipper agreement as well? Are you optimistic on that?

Sorry, you broke up on one piece. What did you say? Shipper agreement.

I'm saying like, yeah, you got to see agreement with CN. Do you think it'll announce some kind of big shipper agreements as well or maybe not for a while?

Listen, we talk to our customers all the day. We have said to a number of customers how do we move ahead? How do we make sure that they understand how it is and how they can win in the marketplace? Yeah, we're not going to announce them because they're private deals, at the end of the day, absolutely. We've been talking to a lot of customers. I sent a letter to our top 50 customers saying, "If you have any questions about the business that we're doing together," I sent it to their CEOs, "here's my phone number.

Give me a call, text me. We'll get the teams together to go through details so you understand what the benefits are."I had a meeting on Monday with one of the big shippers here in the Midwest. They're not going to come out. He told me black and white. He says, "Listen, I'm not going to come out to support it because the other people have not. I worry about what they might say and do if I do." At the end of the day, he says, "I see the advantage." If we're moving pulse products from the southeast U.S. to the west, which they are, they see the seamless. Customers, absolutely. Thanks for the question. It got me to fill in all the gaps of what I haven't been able to say yet this morning. Appreciate it.

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. Maybe just one real quick for Jennifer, then a couple for Jim. Jennifer, the comp per head up 6%. Typically, you have good visibility on that to start the year. It continues to move up a bit. Just wanted to see what the driver was for that. Jim, you mentioned or hinted that there'll be some, I guess, improvements, expanding of the CGP and a couple other, I guess, voluntary enhancements, if you want to call them that we'll see on Monday. Wanted to see if you could get a little bit more granular on that, give us a little bit of a preview of what to expect. The STB had a couple decisions out yesterday. One that was interesting, just the trackage rights, the reciprocal switching with UP going back to Lake Charles. Is that anything that you think sets a precedent as you start to work towards the merits of review of the transaction on the merits? Thanks very much.

Real quick on the STB, listen, I think they were very prudent when they came out with the decisions. Basically, they just said that there are certain things that were in place that just make sense, and you can't just automatically ask for access for nothing on somebody else's property. It would be like somebody setting up a coffee shop and going to Starbucks and saying, "I want to set up a coffee shop in Starbucks because I drove by the freaking place." That doesn't make a particle of sense. That's what the STB said. We're very happy. Now, are we happy with every decision? No. They want us to put out detailed information on employees. You think about it, we've given it to every law firm that covers every person that might want to comment on this deal.

Union Pacific (UNP) Q2 2026 Earnings Call Transcript

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