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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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Thank you for accessing Union Pacific Corporation's 2026 third quarter earnings conference call held at 8:45 A.M. Eastern Time on October 22, 2026 in Omaha, Nebraska. This presentation and the accompanying materials include statements that contain estimates, projections, or expectations regarding the company's financial results and operations and future economic conditions. These statements are forward-looking statements as defined by the federal securities laws. Forward-looking statements are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the statements. The materials accompanying this presentation include more detailed information regarding forward-looking information and these risks and uncertainties. In addition, please refer to the company's website and SEC filings for additional information about our risk factors.

Greetings, and welcome to Union Pacific's third 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 today 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.

Thanks, Rob. Sorry, I'm rather fast this morning. I'm ready to go. I overstepped you, so hopefully I don't do that to everybody today. No, I hope I am. We're ready to go here. So why don't we take a step back and think about where we are as a company and what we're doing. This morning, my wife, for whatever reason, got me up a little early. So I had a little more time to look at the railroad real close, and the first thing I look at is what's happening to the railroad weather-wise. Bottom line is, this is my favorite time of the year to railroad. Eric will tell you the same thing. Engineering programs are in a different place. The railroad is well set up. You don't have the extremes, too much of an extreme of weather.

It is a beautiful morning here in Omaha. Absolutely gorgeous. I'll tell you, it's a great place to live and a wonderful spot. The railroad's good. The range of temperature we have is from the low 30s to the high 80s, but that's who we are, and we have thousands of employees out there right now. Yesterday, we had 2.31 billion GTMs of product that we moved in this railroad, and all the people out there, and I got to congratulate them on the quarter that we had. Very excited to share with all of you who we are, what we're doing, and one thing we're not changing is the key pillars that we have. Safety for us is the foundation, and Eric will take you through some of the detail.

But where we are this year on an injury rate improvement from last year, where we are in the derailment rate, significant improvement from last year that continues all the work we've done, is very exciting as a foundation of everything that we do. And listen, safety for us is more than just a number. It's about people going home exactly the same way as they showed up when they came to work, and it's the movement of the goods that we have for America. We are moving products across the Western states and pretty soon across the entire country. That just helps the economy and helps businesses move ahead. So I love where we are safety, and I know Eric's got some more detail on that as we move ahead. And service, absolutely, I love where our service is.

We're delivering what we sold the customer and what we agreed to. And operational excellence, I see numbers in detail that I had a chance this morning to spend probably a half an hour, usually it's five minutes on, that show me that the number of cars that missed their plan, that we call 32-hour cars, is like 15% lower with business up. The number of locomotives we have out there running and operating don't match the amount of business increase, meaning we have way less locomotives operating, so much more efficient with them. The way the cars are turning, the car velocity is exactly the same as it was last year at this time with increase in business to show the resiliency of our buffer and how we handle traffic.

So I guess if I don't stop there, I might as well just tell everybody to keep quiet, and we'll just go to question and answers. But let me, real quick, tell you who's here with me. Our Chief Financial Officer, of course, Jennifer's with me every quarter. Love having her here. She's next to me. Kenny Rocker, Executive VP of Marketing and Sales, always in the right spot, right there to my right, and across the table, Eric Gehringer, our Executive Vice President of Operations, and I can't be prouder of what the team has done. If we can turn to slide four and quickly review. So this morning, Union Pacific reported record financial results as net income total, $2.1 billion, and our adjusted earnings per share grew 15% to $3.53.

Union Pacific's third quarter results demonstrate our ability to safely deliver the service we sold our customers while efficiently handling 6% volume growth. Higher fuel prices were a big cost driver, but when we take out the impact of fuel price and merger costs, our core operating ratio improved 110 basis points from last year. Now I'll let the team walk you through the results in more detail, and then I'll come back to talk about the Q&A and maybe a quick wrap-up before we finish the call. And Jennifer, all yours with some of the details on the financials, please.

All right. Thank you, Jim, and good morning, everyone. I will begin with our third quarter income statement on slide six, where operating revenue of $7.2 billion increased 15% versus last year. Digging into the components of our growth further, freight revenue totaled $6.8 billion, up 15% on 6% volume growth. In addition, higher YoY fuel prices and the related fuel surcharge added 900 basis points to freight revenue. Although our quarterly pricing gains continue to exceed our inflation dollars, that contribution from price was masked by business mix, as nearly 75% of our quarterly volume growth was from domestic and international intermodal traffic. Wrapping up the top line, other revenue increased 21% to $384 million, as higher intermodal volume contributed to increases in both accessorial and subsidiary revenue.

Turning to expense, our appendix slides will provide more detail as our total operating expense increased 15% to $4.3 billion, primarily from the higher diesel fuel prices. Compensation and benefits expense increased 4%, as cost per employee was up 5%, driven by higher wages, incentive compensation, and training costs. Offsetting some of that cost pressure was a 1% decrease in headcount against that 6% volume growth, enabling us to generate our ninth consecutive quarter of record workforce productivity. Fuel expense grew 69% on a 64% increase in average fuel price and 4% higher gross ton-miles. YoY, our price per gallon increased from $2.56 to $4.21 and added 140 basis points to our operating ratio. Purchase services and material expense increased 9% as a result of inflation, intermodal-related costs for our Loup subsidiary and the railroad, as well as cost to add surge locomotives to the active fleet.

These increases were partially offset by lower YoY merger costs. Equipment and other rents declined 3% versus 2025, as we more than offset the impact of volume growth with lower car hire and operating lease expense. Putting it all together, we had a record quarter with reported earnings per share of $3.49. Adjusted for merger costs, earnings per share totaled $3.53, and our operating ratio was 58.8%. Turning to cash returns in the balance sheet on slide seven. Our record financial results translated into 18% growth in cash from operations to $8.3 billion. Free cash flow totaled $2.4 billion after we reinvested in our network and increased our third quarter dividend 3%, the 20th consecutive year providing our shareholders with an annual dividend raise. We finished the quarter holding $3.1 billion between cash and short-term investments, and with an adjusted debt-to-EBITDA ratio of 2.4x.

We will continue growing our cash reserves in anticipation of closing the Norfolk Southern merger in the second half of 2027. Looking out to the remainder of 2026 on slide eight, we are affirming our outlook of reported EPS growth in the high single-digit range versus 2025's reported EPS of $11.98. As a quick reminder, that $11.98 included $0.30 from a fourth quarter land sale. We are also affirming our ability to continue improving our core operating ratio in 2026 and leading the industry. Our 2026 reported operating ratio remains challenged by higher fuel prices, as we are currently expecting prices to average around $4.85 per gallon in the fourth quarter. We are also updating our capital spend to $3.5 billion for 2026 as we invest for growth and pull ahead some of the capital work planned for 2027.

Overall, we are delivering strong financial results in 2026 as we consistently execute on the three key levers for our railroad success, volume, pricing, and productivity. I will now turn it over to Kenny to provide an update on the markets.

All right. Thank you, Jennifer, and good morning. We delivered a record revenue quarter with freight revenue increasing 15% to $6.8 billion.

Excluding fuel surcharge, freight revenue grew 6% to a record $5.6 billion. That is the result of our team at Union Pacific winning in the marketplace, pricing to the value of our service product, and executing for our customers every single day. Moving to slide 10, let us talk about the key drivers for each of our business groups. Starting with our bulk segment, revenue was up 10% compared to last year on flat volume. Grain and grain products was driven by strong export grain demand and continued growth in renewable fuels, ethanol, and feedstocks. These gains were partially offset by lower wheat shipments resulting from a softer harvest. Coal and renewables volume declined 3% as lower natural gas prices and elevated inventories weighed on demand. Moving to industrial. Revenue was up 14% on 6% higher volume.

Our strong service product and business development efforts led to record industrial car loads and freight revenue excluding fuel. We saw growth in all of our major commodity segments. Metals and minerals growth was driven by our construction project wins located in Louisiana and Texas. We also benefited from sustained strength in our domestic steel production. Energy and specialized markets growth was driven by business development wins across petroleum, non-metallic minerals, government, and waste markets. Petroleum products benefited from refinery utilization that remained at near record levels. Premium revenue for the quarter increased 21% on a 9% increase in volume and set a record for freight revenue and freight revenue excluding fuel. Domestic Intermodal delivered its fifth consecutive record quarter in both volume and revenue. Our foundation of service, combined with strong business development and the deployment of buffer resources, enabled 13% volume growth.

International Intermodal volumes improved 8% versus last year, driven by strong West Coast import volumes and business wins. In automotive, business wins offset continued market softness. We saw strength in auto parts driven by growth with our current OEMs, as well as over-the-road conversions with parts suppliers. Looking ahead to slide 11. Grain and grain products is positioned for further growth, driven by strong export grain demand and our ongoing business development efforts.

We are also seeing a positive impact from new facilities, including Bunge and 5B, both in Dalhart, Texas. Our industrial development pipeline in this market remains strong. In fact, I recently took part in the groundbreaking of CHS's new crush facility in Evansville, Wisconsin, which we will serve. We also see continued upside from renewable fuels and feedstocks supported by further policy certainty. In coal, lower natural gas prices and elevated inventories will continue to be a challenge.

Our pricing discipline and business wins are helping to offset some of the market-driven declines. Moving to industrial. We are focused on winning new business and outperforming industrial production. In metals, we expect continued strength from our construction projects and domestic steel production. In petrochemicals, we are excited to see the Golden Triangle Polymers plant in Texas continue their commissioning and start up activities towards full operations. Concurrently, export demand for plastics is strong as customers respond to disruptions in global supply. Overall, we expect continued momentum supported by our strong service product and the investments we have made in the Gulf. Wrapping up with premium. Domestic Intermodal is on track to deliver its third consecutive record volume year, supported by over-the-road conversions and our service product. International Intermodal has fully lapped last year's tariff volatility, and we expect volume to grow double digits in the fourth quarter.

For automotive, we expect business wins to continue to offset market weakness. While we delivered a record third quarter, our focus is to build upon that success. We remain committed to pricing to the value of our service product and capturing new opportunities across the network. With that, I will turn it over to Eric.

Thank you, Kenny, and good morning. The team operated at a consistently high level, safely supporting 6% volume growth while providing strong service for our customers. By remaining agile and strategically deploying resources, we overcame weather-related and seasonal network challenges and improved network fluidity. Importantly, we continue to be disciplined and committed to personal injury and derailment prevention efforts as our employee safety and derailment rates both improved against our three-year rolling average. Moving to slide 13. The majority of our key operating metrics improved in the quarter of 2026, even as car load volume increased 6%, reinforcing the importance of maintaining surge resources and highlighting the resiliency of our network. Freight car velocity increased 1% to 228 mi per day, driven by a 2% improvement in terminal dwell.

This marks our fourth straight quarter of terminal dwell below 20 hours, demonstrating our ability to run an efficient network while handling higher demand. We delivered the service we sold to our customers. Intermodal Service Performance Index finished at 92% as Intermodal volume grew 11%. We responded quickly to capitalize on the improving freight market by unstacking containers and utilizing our buffer of resources. Manifest Service Performance Index finished at 93% against best ever industrial car loads. While these results reflect solid execution, we continue to see opportunities to perform even better. We know what is possible, which is why our Service Performance Index is set to continually challenge the team by setting the threshold at our best monthly performance. Moving to slide 14. Operating discipline and consistent execution of the fundamentals drove another quarter of record workforce productivity, record train length and record fuel consumption.

Locomotive productivity of 140 gross ton-miles per horsepower day was even with last year's record third quarter. The active locomotive fleet increased 2% to handle 4% higher gross ton-miles, demonstrating strong asset efficiency. Additionally, we continue to benefit from our ongoing locomotive modernization investments and fuel conservation initiatives as our fuel consumption rate decreased 2% and set a new quarterly record. Workforce productivity improved 5% as our active train engine and yard workforce increased 1% against 6% higher car loads. We remain diligent in our hiring approach, aligning resources with demand while delivering for our customers. Finally, we continue to safely increase train length, which improved 2% to nearly 10,000 ft. This remarkable progress is supported by technology improvements and mainline capacity infrastructure investments that enhance network efficiency. These results are a testament of our unwavering focus on safety, service and operational excellence.

The team is well-positioned to serve our customers and empowered to raise the bar in what's possible. With that, I'll turn it back over to Jim.

Thank you, Eric. Thanks, everybody. Great presentation on who we are and what we're doing. Listen, before I tidy this up and get to the questions, which is the part I'm looking forward to, is the real smart questions we're going to get this morning. I'd like to talk about Jennifer, my favorite CFO and the person that's been by my side since I came back as CEO. I've known Jennifer and I met her first in 2019, and then when she took over as CFO in 2020. She is grounded, tough, sweet, tough, delivers, listens and tough. I find that to be a perfect mix. She has delivered for this company for many years. I have to thank her for extending her stay a year longer than when I came back to work.

She was going to stay for a couple of years and then depart, and she's been with me for three years and will finish off early next year. I can't be more pleased that she's going to go enjoy herself and do things with her and Kippy and enjoy life a little bit. I know she's going to miss me and she's going to miss this railroad, and who knows? It's just October, so we'll leave it at that. Jennifer, thank you very much for everything you've done.

I speak truth. If you were awful, I would have just said, "Thank you very much. Away you go. Go enjoy yourself and don't come- watch the door as it hits you in the back.

Listen, Jennifer, in all seriousness, you've done a spectacular job for this company seeing all the things that it's been through, and you've been very helpful on the merger and everything else we've done, so congratulations to you. But I wouldn't mind, real quick, just before I get to the questions, summarize what you've heard and make sure that everybody's clear and provide a quick update on the merger with Norfolk Southern. Our third quarter results reflect the strength of our franchise and our ability to execute at a consistently high level. 6% volume growth and 110 basis points of core operating ratio improvement don't just happen. It's a result of a long-term execution of our strategy that has enabled record financials and reinforcing our position as industry leader.

Year-to-date in 2026, we delivered reported EPS growth of 9%, exactly in line with our outlook of reported high single-digit growth. We are focused on what's possible, delivering at the highest level and winning even more business. As to the status of our merger with Norfolk Southern, the Surface Transportation Board published a procedural schedule. Based on the schedule, we should be reporting our first earnings as a merged company a year from now. We also have requested for the second time ex parte communications. That's lawyer talk.

Jim Vena talk is we are more than willing to have open discussion with the STB for any information they need or if anybody at the STB or others want us to take through all the detail in those 8,000 pages, because there is a lot of benefits for the country, for our customers, for our employees and for the movement of goods seamlessly at a faster rate that's in that 8,000 pages detail that we've given. We're hoping that they accept the ex parte and we're able to stop any of this, that we're trying to hold back any information.

This is the second time we've done that, and it's real important to think that we have always been open and willing to talk about, and we can hardly wait to see the November 18th openness from anybody that wants to put comments in about who we are and what we've been doing with the merger. Now, we're very confident the merger application and the information we've provided are the most extensive and transparent merger record ever submitted, and it demonstrates through fact and analysis that the best way to enhance the U.S. freight supply chain is through the UP-NS combination. Our merger, as I said before, but I love to repeat myself on this, will deliver substantial measurable benefits by strengthening the supply chain.

It will lower transportation costs and provide faster, more seamless rail service options that enable our customers to compete and help keep goods affordable for American consumers. You can see it every day, even with the latest announcements from some of our competitors. They know they have to up their game and be better to be able to compete against this railroad when we get the merger approved. With that, Rob, let's go to question and answers. Thank you very much.

Thank you, Mr. Vena, and best wishes, Jennifer. Thank you. We'll now be conducting our question and answer session. To ask a question at this time, you may press star one from your telephone keypad, and a confirmation tone will indicate your line's in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We do remind you that 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. Our first question is from the line of Chris Wetherbee with Wells Fargo. Please proceed with your question.

Good morning, Jim. Congrats, Jennifer. I don't want to imply we're getting old, but I think you and I have been talking for a very long time, so well-deserved in your retirement. So wish you all the best. I think I wanted to start maybe big picture on the M&A side, Jim, just where you kind of left off, I guess. How do you think about sort of the receptivity? I know in mid-November, we'll get some commentary from all the folks who want to sort of weigh in on the merger, and it'll probably be incremental to some of the stuff we've heard already from some of the other railroads. You obviously were very successful getting an agreement with CN. How do you think about potentially sort of staving off some of the other potential asks by further agreements?

I don't know if there's any receptivity that you're seeing out there from competitors or other folks in the industry. Just want to get a sense of how you're thinking about discussions that may be going on in the background with other folks in the industry.

Chris, listen, I appreciate the question. I can't believe you and Jennifer think you might be old. I don't know. I woke up this morning, I was ready to run over anybody that was in my way coming into the office, and I'm a lot older than all of you guys, but that's okay. Let's get to the whole M&A. I think sometimes we have to make sure that we understand what it is that we're doing. This is an end-to-end attachment between the two companies that extend the possibility of how people want to move. This is not a big overlap.

We knew we had to fix some of the areas, a very small piece, the St. Louis, Kansas City, and with Canadian National, listen, we have a deal that should be announced, finalized completely right away with all the T's crossed and the I's dotted. Tracy Robinson and her team have done a spectacular job of protecting Canadian National, and we've done a good job of protecting Union Pacific, and that deal is just about done, so I love it. Given that, really, there isn't a lot of opportunity to say, what do we trade? Are we willing to trade benefits for the industry? Sure. There is not a lot of competitive benefit that we need to fix within the merger and what we're going to deliver.

Listen, I've seen what people have asked for, the very first one without the detail, and hopefully nobody has their kids on this. I hate to tell people, there is no Santa Claus. It's not a freebie that you get to go in front of Santa Claus and wish for something that's going to happen on December 25th in the morning, then you get it delivered down the chute, the fireplace. Most places don't have real fireplaces anymore, so it's fake. What they're putting in, if their dream is off, it needs to be fact-based on what the impact is. It's pretty hard for anybody in this industry, other than being selfish for themselves or trying to get something for free. This is going to be a long answer.

Even some of the unions that are against us, that are part of the coalition, I would ask the unions that are in the coalition if they have asked their partners, the railroads, to guarantee a job for life for every employee like we have. The benefits of what we are doing is across the board for consumers, for the nation, for our employees. I do not think we are going to have a lot that we have to move. The STB was pretty clear when they approved the Canadian Pacific and Kansas City merger. They handed out no concessions to other railroads because there was no big overlap in movement. The pattern is set, and that is why I am looking forward to go through this process, Chris. Sorry for the long answer. Hopefully, I answered it.

Always appreciate the perspective and best wishes, Jennifer. Take care.

Our next question is from the line of Jonathan Chappell with Evercore ISI. Please proceed with your question.

Jonathan, perhaps your line is on mute. Okay, Mr. Vena, it appears he may have lost his line. I will move on. Our next question will be from Ken Hoexter with Bank of America.

Hey, great. Good morning. Jen, congrats. It has definitely been a long time since we met back in 2002, so thanks for all your help along the way and best of luck in your next phase. I guess if I jump into, I guess, looking forward, right? Volumes are trending at double digits quarter-to-date, so it looks like you have accelerated a bit. Kenny, good job there. But maybe, Jen, dig into the outlook a bit for upper single digit growth. You are raising your CapEx $200 million. You noted you used your surge resources. So if that growth sustains, maybe thoughts on investments or capital going forward, ability to beat the targets and sustain, given your need to increase the investment and keep pace. If you are using surge resources, do you have some left on the side if you continue to get this strong growth?

Yeah, Ken, thanks for the question and thanks for the well wishes. Yeah, we feel very confident that we have sufficient resources that we can deploy and continue to handle the growth seamlessly and continue to put up the great numbers, the record results that we have done so far. But we are wanting to make sure we maintain that surge buffer. That is what I was referencing in the comments around purchase services. We have put more locomotives into service to handle the growth, still hitting record locomotive productivity. But we want to maintain that buffer, because if we get another leg up on the growth, we want to be ready for it. Same with hiring. I think we have, call it, 300+ folks in training right now because we want to make sure we have those crew resources available.

But we are getting, to your point, great volume leverage, and that is what gives us confidence that we are going to be able to finish the year in a very strong manner, putting up high single digit earnings per share growth. It has just been a great year. The thing that has been the variable that we were not anticipating coming into the year is the high fuel prices. Certainly, that has an impact on our results, weighs on our margins. But the team is doing a great job in working with that when you think about our fuel conservation efforts and really the fact that rails are so much more fuel efficient than truck, that is actually enabling us to win even more business and bring it onto the railroad.

In terms of the capital, we look at capital over a multi-year period. Some projects you can accelerate, some projects stall a little bit, depending on permitting and all the variables that go into it. We had an opportunity, and I'll let Eric weigh in here, to pull some things forward. Certainly, we had the cash resources to do it, and it just made sense to do that this year.

Yeah. When you think about, Ken, where we made those adjustments, Jennifer mentioned the locomotives. That's an important one. You know that we've been in multi-year contracts in our modernization overhaul of locomotives, and we saw some opportunity because of how well the railroad continues to operate to pull some of that forward. That's a down payment in the future growth that Kenny's bringing to the railroad. The others were some infrastructure related opportunities that, again because the railroad is running so well, we saw the opportunity to pull some of those projects ahead. I'm just going to reiterate Jennifer's point. When we said used, we didn't say used up. We utilized some of our buffer of resources, of which we have many buffer resources still left across the board.

I think you had 589 locomotives excess this morning.

289 stored, sitting there wondering what the heck you're going to do with them, and the other one's ready to go if we had bulk go up or ag or we had an issue. Ken, I like where we are. It's pretty exciting right now. Good question, though. I love it.

The next question is from the line of Scott Group with Wolfe Research. Please proceed with your question.

Hey, thanks. Good morning. I echo those comments to Jennifer. Jim, do the comments from Costa change your view at all of deal approval, what you need to do to get deal approval? Then separately, Kenny, the yields ex fuel were flat, and I know there is mix, but I think there is an expectation that with better volume, rising trucking rates, that rail pricing is going to accelerate. Is that a reasonable expectation, and when do you think we start to see that? Thank you.

Yeah, listen. I think you were asking me about the one of the four STB members that put out the separate note after they accepted the application and moved it forward. Is that right? Is that what you were asking, Scott? Sorry.

Okay. Bottom line is if you take a look at what's in the application, there is benefits across the board in far of how we enhance competition, how we enhance the product for our customers, how we are going to be able to make it less expensive. If we are faster, if we remove touch points, every customer that uses our railroad that used to have to hand it off to somebody else is going to have a reduction in supply chain costs. It is automatic. It is basic business. We see that every day. We see that every day, even today, when we go hand off to a short line or hand off to somebody else versus the mileage and what we charge to be able to handle it on our own railroad. That is a given.

Listen, I always take people's position, and I read it, and I said to myself, "I wonder if he used AI to summarize the 8,000 pages and all the detail or what," but he is a smart guy, so he has the position, and we are clear, and we would love to have the ex parte discussion with the board to take them through what the benefits are. It is up to them if they want to have that or not, but we are clear on what our case is, Scott. It is a benefit for this country. I do not know how many times I have to say it, and I am not trying to say it to make sure people hear me, other than to say it is fact. Canada has two railroads that go across the entire nation.

There is a reason for that, and they are not split up, even though some of them do not like it. One of them does not like us to have the same thing here. At the end of the day, it is a benefit, and we are able to provide a better product to our customers, and that is what it is all about, and that is why this is going to be approved. I am 99.999% sure that it is going to be approved. Kenny, you want to take the second half? You ready to go?

Yeah. First of all, we do not want to lose sight of the fact that we had a record revenue year ex fuel for Union Pacific, and we have done that in not just one area, in a couple of places that you heard in my comments. It is a dynamic market. When we are going out there to price every day, we are competing against barge, we are competing against sourcing options, we are competing against truck.

There is a lot of competition out there that we have to compete against. Eric and the team have provided us an excellent service product, and that is what we stand on. We are going to price to what the market can support. We want our customers to win. We want to win too, but we want our customers to go out there and win with the excellent service product that we have.

As the service product supports it, we're going to keep pricing to what the market can support.

Thank you. Our next question is from the line of Jason Seidl with TD Cowen. Please proceed with your question.

Hey, thank you, Op. Hey, good morning, Jim, and I'll jump on the train for saying congratulations to Jennifer, and thanks for putting up with guys like me for the past almost 25 years. I wanted to talk a little bit about now that we're in the merits phase and we're coming up along the comments period. Jim, can you talk to maybe some of the ongoing discussions to get more people on the side of supporting the mergers, whether they be customers or some of the unions that may not be supporting right now? Is this something that's ongoing, and could we expect some more letters of support, or is this something that we're just going to have to wait for the comments, and we're going to look forward from there?

Well, I think it's important that we wait for the comments and see what everybody puts forward. Let's talk about the union piece because you raised it.

Bottom line is, no one has given a guaranteed job for life for any unionized employee in the railroad industry, ever. Every employee. It's amazing, so what are we supposed to give? What else is there to give? We're going to grow the business so there's more employees that work because we're going to have a much more efficient railroad. The rail unions that understand that benefit signed up real quick. I don't need them to sign up because for me, it's more important on our employees. Sometimes I wonder whether the union at the highest level is worried about their employees or worried about the employees, they're our employees that are unionized, or they're worried about their union.

The Teamsters, listen, trucking is real important to them, and it's truly amazing that we have them part of the against coalition with railroads that have not guaranteed jobs. In fact, some of them have been cutting people left and right over the last few months, and they still think that's a better model than being. So I don't know how you make a deal there. The merits will show that we have a great plan for our employees. We care about our employees, and we want them to win. So that's where I'm at with it, so I don't see us making a deal with anybody. Now, if it gets reasonable, if people want to talk, I'm good.

On the customer side, we have over 500 customers that have written letters of support across this spectrum. We don't have very many, if any, just a little number of people that have actually gone into the STB and said, "We're against it." We have a lot of customers that we've met that say, "We want to go through and understand through the process." I'm good with that. That's a smart move for some of them. We also just had, in the last two weeks, customers that are in the chemical industry that put a letter of support for us, and they're actually single origination with us in Texas because they see the benefit of that handoff of not happening when we close the deal with Norfolk Southern. Sorry for the long answer, but I think from the customer side, big support.

From the Union Pacific side, our employees understand it. We just finished a survey of our employees, and the feedback's about as good as it's ever been because they understand what providing. Think about it. We hire an 18-year-old because that's who we like to hire to be one of our people in repairing locomotives on the track, operating locomotives, tech people, everything else, and we say to them, "You're unionized. You've been with us for one day. You have a job for life," and the average pay at Union Pacific, all in with benefits, is $160,000. I'm not sure about anybody else, but unless it's rich cats that might be all on this call, there's a lot of benefit for that for everybody that works for Union Pacific. I'm not ready to hurt that. Kenny, you got your hand up. Away you go. Kenny is excited.

He wants to correct something I said, or what, Kenny?

No. Hey, look, we had about 30 of our customers that are excited about the merger. They're going to be helping us with the integration process, and the feedback is that they're looking forward to this happening.

Yeah, I forgot that, Kenny. That's why I got Kenny and Eric and, Jennifer with me. I go on and I forget. I'll try to shorten the answers because otherwise we're going to be here till lunchtime. Away we go.

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

Yeah, thanks very much. Good morning, everyone.

Yeah. Jennifer, echo as well. Congrats on the retirement. Wishing you all the best. Perhaps this is for Kenny. When we look at your intermodal volumes, they've been very good. We're focused a little bit here on some of the items that both you and Jennifer have mentioned on truck to rail conversion opportunity. Can you, maybe trifurcate here between how that volume growth is coming in, whether you're seeing it mostly in general economic coming out of the freight recession type of driver. Is it business wins or is it that truck to rail conversion? Just if you could size it for us, in order of magnitude in those three buckets or if there's other buckets I'm not mentioning here, but I'd appreciate if you could give that kind of color.

Well, this is great. I appreciate that question. I am getting excited that I get to trifurcate the volume growth. Just take a step back. Remember, this volume growth has happened before we saw the inflection and the acceleration of these diesel prices. I said it in my comments. It is our fifth quarter of record growth. Over the last couple quarters, we have seen some things happen with the fuel. Yes, that has helped us go out and win some business. But before, like I mentioned, the service product is what has helped us go out and win that business five quarters ago. Lastly, you look at some of the investments that we made over the last couple three few years. They are paying off as we thought. Twin Cities, Phoenix, modernizing Kansas City, Inland Empire.

Having that capacity to grow the product with a strong service product has helped. We talked a little bit about resources, and Jim and I debate this all the time. What is the right buffer for our UP rail fleet? We have it. We are 100% on our mutual commitment program for customers on our Railbox. But on the boxcar side, Eric, we are 100%, near 100% on car orders. You put it all together, it is all of it, but it starts with the foundation of a strong service product, the investments we have made in the network.

You could just tell everybody what our strategy is completely, Kenny. Thanks, Walter.

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

Hey, good morning, guys. Thanks for taking the question. Jennifer, congratulations and best of luck on the next chapter here. Kenny, I wonder if you could help us understand what's going on with the intermodal business in terms of profitability. It looks like the RPUs came in maybe a little bit lighter than we would have expected, just given what's happening in the truck market. I'm not sure if that's mix on an underlying basis. It also looks like accessorials are elevated and purchase services a little bit up. If you could give us a sense for how the business is performing from a profitability standpoint and how you expect it to perform into 2027 as you get around to maybe the contracts resetting, some of the index-based pricing starting to respond to what we're seeing in the truck market, catch up on fuel, that kind of thing.

Yeah. So remember, David, we saw a transition in what's gone on with the truck rates and truck capacity really over, I'll call it spring to summer, when much of the bid season was pretty much baked. Now, we're going to have an opportunity as we move forward here, end of the year, first several months of 2027, to have a better opportunity with our service products that we have to support the inflection that occurred in the summer. Looking forward, you would expect a better position, a better environment for stronger pricing.

Yeah. David, just on your question or tying in the purchase services, I did reference intermodal volumes. We've got our Loup subsidiary. As intermodal volumes grow with them, we tend to see an increase in some of the drayage costs. That was part of it. You certainly, when you think about our intermodal ramps, they're primarily operated by third party contractors. As we're putting more volume through those ramps, you see some elevation there. But I think it's also important to point out that on the other revenue line, you saw a 21% increase or growth YoY there. That really is intermodal driven as well because that's the revenue that you're seeing come through on that subsidiary side, as well as some of the accessorials associated with our containers.

One thing to recall for everybody is that's what I think is a big differentiator for UP, is not only do we have strong relationships with asset-based IMCs, we also work with the non-asset-based guys because we have our own intermodal box fleet. That's what Kenny was referring to when he said we've got all the players on the field. That's been a big plus for us this year.

Yeah. Listen, thank you very much. Good question.

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

Good morning. Thank you. Appreciate it. Maybe taking this into a different conversation. First, Jennifer, thank you very much for all the help and working with you over the years. I guess maybe starting out, investors, I think, are obviously slicing and dicing a lot of the freight data right now, and I think they're trying to form a broader view on the economy. You've obviously called out some pretty broad-based strengths across industrials, and I think maybe beyond data centers, what are you hearing from customers about demand through the rest of the year?

Union Pacific (UNP) Q3 2026 Earnings Call Transcript

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