Union Pacific Accelerated Revenue Growth and Raised Outlook
Adjusted earnings rose 13% to $3.41 a share in the second quarter.
Union Pacific Corp. (UNP), the freight-railroad operator, reported a 12% increase in second-quarter operating revenue as higher fuel surcharges and yields outweighed limited volume growth.
The quarter marked an acceleration from 3% revenue growth in the first quarter, while total carloads reversed two quarters of year-over-year declines. Revenue increased 10% sequentially to $6.864 billion, and carloads rose about 4% from the first quarter.
Operating income increased 9% from a year earlier to $2.763 billion. Reported net income rose 6% to $1.993 billion, while diluted earnings increased 7% to $3.36 a share. Adjusted net income climbed 12% to $2.028 billion.
Freight revenue rose 12%, accelerating from 4% growth in the previous quarter. Excluding fuel surcharges, freight revenue grew 4%, compared with 3% in the first quarter. Average revenue per car increased 9% as carloads grew 2%, reflecting the contribution from yield, fuel surcharges and traffic mix.
Intermodal carloads increased 4% and average revenue per car climbed 21%. Industrial traffic rose 3% and premium traffic gained 4%, while bulk carloads declined 1% as a 14% drop in coal and renewables offset a 12% increase in grain.
Higher fuel costs pressured profitability even as the network handled more traffic. Fuel expense increased 63% to $938 million as the average fuel price rose 60% to $3.86 a gallon, worsening the operating ratio by 120 basis points. The reported operating ratio improved 80 basis points sequentially to 59.7% but deteriorated 70 basis points from a year earlier.
Union Pacific upgraded its 2026 outlook to “improved” after affirming its expectations in the first quarter, though it provided no revised target ranges.
Year-to-date free cash flow rose 64% to $1.812 billion, while share repurchases fell to $26 million from $2.679 billion a year earlier. Adjusted debt to adjusted EBITDA declined to 2.5 times from 2.7 times at year-end, leaving the railroad with lower leverage as it entered the second half.