Union Pacific Corporation
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Financial statements
data from SEC XBRL filings. Values are as-reported; restatements supersede originals.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
RESULTS OF OPERATIONS
Three months ended March 31, 2026, compared to
three months ended March 31, 2025
For purposes of this report, unless the context otherwise requires, all references herein to "Union Pacific", “UPC”, “Corporation”, “Company”, “we”, “us”, and “our” shall mean Union Pacific Corporation and its subsidiaries, including Union Pacific Railroad Company, which we separately refer to as “UPRR” or the “Railroad”.
The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements and applicable notes to the Condensed Consolidated Financial Statements, Item 1, and other information included in this report. Our Condensed Consolidated Financial Statements are unaudited and reflect all adjustments (consisting only of normal and recurring adjustments) that are, in the opinion of management, necessary for their fair presentation in conformity with accounting principles generally accepted in the United States of America (GAAP).
The Railroad, along with its subsidiaries and rail affiliates, is our one reportable business segment. Although revenues are analyzed by commodity, we analyze the net financial results of the Railroad as one segment due to the integrated nature of the rail network.
Critical accounting estimates
The preparation of these financial statements requires estimation and judgment that affect the reported amounts of revenues, expenses, assets, and liabilities. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. If these estimates differ materially from actual results, the impact on the Condensed Consolidated Financial Statements may be material. Our critical accounting estimates are available in Item 7 of our 2025 Annual Report on Form 10-K. During the first three months of 2026, there have not been any significant changes with respect to our critical accounting estimates.
RESULTS OF OPERATIONS
Quarterly summary
The Company reported earnings of $2.87 per diluted share on net income of $1.7 billion and an operating ratio of 60.5% in the first quarter of 2026 compared to earnings of $2.70 per diluted share on net income of $1.6 billion and an operating ratio of 60.7% in the first quarter of 2025. Freight revenues increased 4% in the first quarter of 2026 compared to the same period in 2025 as core pricing gains, higher fuel surcharge revenues, and business mix more than offset a 1% reduction in volume. Higher carloads in domestic intermodal, coal, grain, and industrial chemicals and plastics were more than offset by lower international intermodal carloads, which declined 28% in the first quarter of 2026, and fewer automotive shipments.
Building on solid performance levels throughout 2025, our rail network remained fluid, while improving service levels and operational execution, to achieve best-ever first quarter key operating metric results. Freight car velocity increased 9% and terminal dwell improved 11%. We efficiently aligned operational resources to meet changing customer demands to more bulk and manifest carloads, while increasing train length 3%, despite lower intermodal carloads. Workforce productivity improved 7% and locomotive productivity improved 6% as we optimized network resources while improving both service performance index measures.
Operating expenses increased 3% compared to the first quarter of 2025 due to inflation, higher fuel prices, acquisition-related expenses (see Note 17 to the Condensed Consolidated Financial Statements, Item 1), and higher depreciation, partially offset by productivity. Operating income increased 4% to $2.5 billion, and the operating ratio of 60.5% improved 0.2 points, reflecting top-line growth and productivity gains compared to the first quarter of 2025.
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Operating revenues | ||||||||||||||||||||||
| Millions, for the three months ended March 31, | 2026 | 2025 | Change | |||||||||||||||||||
| Freight revenues | $ | 5,893 | $ | 5,691 | 4% | |||||||||||||||||
| Other subsidiary revenues | 175 | 194 | (10) | |||||||||||||||||||
| Accessorial revenues | 126 | 118 | 7 | |||||||||||||||||||
| Other | 23 | 24 | (4) | |||||||||||||||||||
| Total | $ | 6,217 | $ | 6,027 | 3% | |||||||||||||||||
We generate freight revenues by transporting products from our three commodity groups. Freight revenues vary with volume (carloads) and average revenue per car (ARC). Changes in price, traffic mix, and fuel surcharges drive ARC. Customer incentives, which are primarily provided for shipping to/from specific locations or based on cumulative volume, are recorded as a reduction to operating revenues. Customer incentives that include variable consideration based on cumulative volume are estimated using the expected value method, which is based on available historical, current, and forecasted volume, and recognized as the related performance obligation is satisfied. We recognize freight revenues over time as shipments move from origin to destination. The allocation of revenues between reporting periods is based on the relative transit time in each reporting period with expenses recognized as incurred.
Other subsidiary revenues (primarily logistics operations) are generally recognized over time as shipments move from origin to destination. The allocation of revenues between reporting periods is based on the relative transit time in each reporting period with expenses recognized as incurred. Accessorial revenues are recognized at a point in time as performance obligations are satisfied.
Freight revenues increased 4% on 1% lower carloads in the first quarter of 2026 compared to the same period in 2025 driven by core pricing gains, higher fuel surcharge revenue, and a more favorable business mix (decreases in shipments with lower ARC, such as international intermodal). Higher carloads in domestic intermodal, coal, grain, and industrial chemicals and plastics shipments were more than offset by lower international intermodal carloads and automotive shipments.
Each of our commodity groups includes revenues from fuel surcharges. Freight revenues from fuel surcharge programs increased to $608 million in the first quarter of 2026 compared to $565 million in the same period of 2025 due to higher fuel prices, which were partially offset by the fuel price lag impact (it generally takes up to two months for changing fuel prices to affect fuel surcharge recoveries) and lower volumes.
Other subsidiary revenues decreased in the first quarter of 2026 compared to 2025 primarily driven by the transfer of commuter operations to Metra, lower demand for auto part shipments at our subsidiary that brokers intermodal and transload logistics services, and the sale of a portion of revenue-generating assets in late 2025 from our technology subsidiary. Accessorial revenues increased in the first quarter 2026 compared to 2025 driven by increased storage and intermodal accessorial revenues.
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The following tables summarize the year-over-year changes in freight revenues, revenue carloads, and ARC by commodity type:
| Freight revenues | ||||||||||||||||||||||
| Millions, for the three months ended March 31, | 2026 | 2025 | Change | |||||||||||||||||||
| Grain & grain products | $ | 1,057 | $ | 950 | 11% | |||||||||||||||||
| Fertilizer | 236 | 210 | 12 | |||||||||||||||||||
| Food & refrigerated | 247 | 260 | (5) | |||||||||||||||||||
| Coal & renewables | 486 | 416 | 17 | |||||||||||||||||||
| Bulk | 2,026 | 1,836 | 10 | |||||||||||||||||||
| Industrial chemicals & plastics | 655 | 607 | 8 | |||||||||||||||||||
| Metals & minerals | 555 | 521 | 7 | |||||||||||||||||||
| Forest products | 318 | 321 | (1) | |||||||||||||||||||
| Energy & specialized markets | 663 | 633 | 5 | |||||||||||||||||||
| Industrial | 2,191 | 2,082 | 5 | |||||||||||||||||||
| Automotive | 560 | 581 | (4) | |||||||||||||||||||
| Intermodal | 1,116 | 1,192 | (6) | |||||||||||||||||||
| Premium | 1,676 | 1,773 | (5) | |||||||||||||||||||
| Total | $ | 5,893 | $ | 5,691 | 4% | |||||||||||||||||
| Revenue carloads | ||||||||||||||||||||||
| Thousands, for the three months ended March 31, | 2026 | 2025 | Change | |||||||||||||||||||
| Grain & grain products | 243 | 214 | 14% | |||||||||||||||||||
| Fertilizer | 52 | 49 | 6 | |||||||||||||||||||
| Food & refrigerated | 39 | 43 | (9) | |||||||||||||||||||
| Coal & renewables | 214 | 185 | 16 | |||||||||||||||||||
| Bulk | 548 | 491 | 12 | |||||||||||||||||||
| Industrial chemicals & plastics | 181 | 169 | 7 | |||||||||||||||||||
| Metals & minerals | 183 | 174 | 5 | |||||||||||||||||||
| Forest products | 49 | 51 | (4) | |||||||||||||||||||
| Energy & specialized markets | 147 | 143 | 3 | |||||||||||||||||||
| Industrial | 560 | 537 | 4 | |||||||||||||||||||
| Automotive | 183 | 195 | (6) | |||||||||||||||||||
| Intermodal [a] | 792 | 874 | (9) | |||||||||||||||||||
| Premium | 975 | 1,069 | (9) | |||||||||||||||||||
| Total | 2,083 | 2,097 | (1)% | |||||||||||||||||||
| Average revenue per car | ||||||||||||||||||||||
| For the three months ended March 31, | 2026 | 2025 | Change | |||||||||||||||||||
| Grain & grain products | $ | 4,345 | $ | 4,434 | (2)% | |||||||||||||||||
| Fertilizer | 4,564 | 4,339 | 5 | |||||||||||||||||||
| Food & refrigerated | 6,414 | 6,058 | 6 | |||||||||||||||||||
| Coal & renewables | 2,270 | 2,250 | 1 | |||||||||||||||||||
| Bulk | 3,700 | 3,744 | (1) | |||||||||||||||||||
| Industrial chemicals & plastics | 3,620 | 3,601 | 1 | |||||||||||||||||||
| Metals & minerals | 3,028 | 2,986 | 1 | |||||||||||||||||||
| Forest products | 6,505 | 6,264 | 4 | |||||||||||||||||||
| Energy & specialized markets | 4,505 | 4,433 | 2 | |||||||||||||||||||
| Industrial | 3,911 | 3,877 | 1 | |||||||||||||||||||
| Automotive | 3,058 | 2,971 | 3 | |||||||||||||||||||
| Intermodal [a] | 1,408 | 1,364 | 3 | |||||||||||||||||||
| Premium | 1,718 | 1,658 | 4 | |||||||||||||||||||
| Average | $ | 2,829 | $ | 2,714 | 4% | |||||||||||||||||
[a]For intermodal shipments each container or trailer equals one carload.
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Bulk – Bulk includes shipments of grain and grain products, fertilizer, food and refrigerated, and coal and renewables. Freight revenues from bulk shipments increased 10% in the first quarter of 2026 compared to 2025 due to 12% volume growth, core pricing gains, and higher fuel surcharge revenues, partially offset by business mix (from increased coal shipments). Bulk carload growth was driven by increased coal shipments from continued higher coal usage in electricity generation due to elevated natural gas prices combined with business wins, and also driven by increased export grain shipments, partially offset by lower food and refrigerated carloads.
Industrial – Industrial includes shipments of industrial chemicals and plastics, metals and minerals, forest products, and energy and specialized markets. Freight revenues from industrial shipments increased 5% in the first quarter of 2026 compared to 2025 due to increased volumes, core pricing gains, and higher fuel surcharge revenues, partially offset by business mix (from higher rock shipments and lower lumber shipments). The 4% quarterly carload improvement was driven by increased demand for industrial chemicals and plastics and construction materials coupled with business development efforts, which more than offset reduced shipments from continued weak lumber demand.
Premium – Premium includes shipments of finished automobiles, automotive parts, and merchandise in intermodal containers, both domestic and international. Premium freight revenues decreased 5% in the first quarter of 2026 compared to 2025 driven by 9% lower volumes, which were partially offset by higher fuel surcharge revenues, core pricing gains, and business mix (from reduced international intermodal shipments). First quarter of 2026 intermodal volumes were down 9% driven by a 28% reduction in international intermodal carloads as a result of elevated U.S. West Coast imports in the first quarter of 2025 that did not recur, partially offset by continued strong domestic intermodal growth. Automotive shipments decreased 6% in the first quarter of 2026 compared to 2025 due to lower production as a result of weaker finished vehicle demand.
Mexico business – Freight revenues from each of our commodity groups includes revenues from shipments to and from Mexico, which increased 1% to $729 million in the first quarter of 2026 compared to 2025 driven by 3% volume growth due to increased intermodal, partially offset by lower beverage, steel, and automotive shipments.
Operating expenses | ||||||||||||||||||||||
| Millions, for the three months ended March 31, | 2026 | 2025 | Change | |||||||||||||||||||
| Compensation and benefits | 1,227 | 1,212 | 1% | |||||||||||||||||||
| Purchased services and materials | 673 | 631 | 7 | |||||||||||||||||||
| Fuel | 643 | 603 | 7 | |||||||||||||||||||
| Depreciation | 633 | 610 | 4 | |||||||||||||||||||
| Equipment and other rents | 219 | 241 | (9) | |||||||||||||||||||
| Other | 364 | 359 | 1 | |||||||||||||||||||
| Total | $ | 3,759 | $ | 3,656 | 3% | |||||||||||||||||
Operating expenses increased 3% compared to the first quarter of 2025 due to inflation, higher fuel prices, acquisition-related expenses (see Note 17 to the Condensed Consolidated Financial Statements, Item 1), and higher depreciation expense. These increases were partially offset by productivity.
Compensation and benefits – Compensation and benefits include wages, payroll taxes, health and welfare costs, pension costs, and incentive costs. For the first quarter of 2026, compensation and benefits expense increased 1% compared to 2025 due to wage inflation and higher incentive compensation costs, which was partially offset by lower employee levels.
Purchased services and materials – Expense for purchased services and materials includes the costs of services purchased from outside contractors and other service providers (including equipment maintenance and contract expense incurred by our subsidiaries for external transportation services); materials used to maintain the Railroad’s lines, structures, and equipment; costs of operating facilities jointly used by UPRR and other railroads; transportation and lodging for train crew employees; trucking and contracting costs for intermodal containers; leased automobile maintenance expense; and tools and supplies. Purchased services and materials increased 7% in the first quarter of 2026 compared to 2025 driven by acquisition-related expenses and inflation offset by lower costs associated with improved locomotive productivity.
Depreciation – The majority of depreciation expense relates to road property, including rail, ties, ballast, and other track material. Depreciation expense increased 4% for the first quarter of 2026 compared to 2025 driven by a higher depreciable asset base.
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Fuel – Fuel includes locomotive fuel and gasoline for highway and non-highway vehicles and heavy equipment. Fuel expense increased in the first quarter of 2026 compared to the same period in 2025 driven by an increase in locomotive diesel fuel prices and gross ton-miles, partially offset by 4% improvement in the fuel consumption rate (computed as gallons of fuel consumed divided by gross ton-miles in thousands). Locomotive diesel fuel prices averaged $2.69 and $2.51 per gallon (including taxes and transportation costs) in the first quarter of 2026 and 2025, respectively.
Equipment and other rents – Equipment and other rents expense primarily includes rental expense that the Railroad pays for freight cars owned by other railroads or private companies; freight car, intermodal, and locomotive leases; and office and other rent expense, offset by equity income from certain equity method investments. Equipment and other rents expense decreased 9% in the first quarter of 2026 driven by lower car hire expense attributable to improved cycle times and lower operating equipment lease expense, partially offset by lower equity income.
Other – Other expense includes state and local taxes; freight, equipment, and property damage; utilities; insurance; personal injury; environmental remediation; employee travel; telephone and cellular; computer software; bad debt; and other general expenses. Other expense increased 1% in the first quarter of 2026 compared to 2025 driven by higher equipment and property damage costs, property taxes, and bad debt expense. These increases are partially offset by lower personal injury costs.
Non operating items | ||||||||||||||||||||||
| Millions, for the three months ended March 31, | 2026 | 2025 | Change | |||||||||||||||||||
| Other income, net | $ | 91 | $ | 78 | 17% | |||||||||||||||||
| Interest expense | (320) | (322) | (1) | |||||||||||||||||||
| Income tax expense | (528) | (501) | 5 | |||||||||||||||||||
Other income, net – Other income increased in the first quarter of 2026 compared to 2025 driven by higher real estate income. See Note 6 to the Condensed Consolidated Financial Statements, Item 1, for additional detail.
Interest expense – Interest expense decreased slightly in the first quarter of 2026 compared to 2025 as a result of lower weighted-average debt levels. The effective interest rate was 4.1% for both periods. The weighted-average debt levels were $31.4 billion and $31.9 billion for first quarter of 2026 and 2025, respectively.
Income tax expense – Income tax expense increased 5% in the first quarter of 2026 compared to 2025 due to higher pre-tax income. Our effective tax rates were 23.7% and 23.6% for the first quarter of 2026 and 2025, respectively.
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OTHER OPERATING/PERFORMANCE AND FINANCIAL STATISTICS
We report a number of key performance measures weekly to the STB. We provide these on our website at https://investor.unionpacific.com/key-performance-metrics.
Operating/performance statistics
Management continuously monitors these key operating metrics to evaluate our operational efficiency in striving to deliver the service product we sold to our customers.
Railroad performance measures are included in the table below:
| For the three months ended March 31, | 2026 | 2025 | Change | |||||||||||||||||||
| Gross ton-miles (GTMs) (billions) | 220.6 | 212.8 | 4% | |||||||||||||||||||
| Revenue ton-miles (billions) | 111.5 | 104.0 | 7 | |||||||||||||||||||
| Freight car velocity (daily miles per car) | 235 | 215 | 9 | |||||||||||||||||||
| Average train speed (miles per hour) [a] | 25.5 | 23.7 | 8 | |||||||||||||||||||
| Average terminal dwell time (hours) [a] | 19.7 | 22.1 | (11) | |||||||||||||||||||
| Locomotive productivity (GTMs per horsepower day) | 144 | 136 | 6 | |||||||||||||||||||
| Train length (feet) | 9,746 | 9,490 | 3 | |||||||||||||||||||
| Intermodal service performance index (%) | 98 | 94 | 4 pts | |||||||||||||||||||
| Manifest service performance index (%) | 98 | 93 | 5 pts | |||||||||||||||||||
| Workforce productivity (car miles per employee) | 1,163 | 1,091 | 7 | |||||||||||||||||||
| Total employees (average) | 28,647 | 30,146 | (5) | |||||||||||||||||||
| Operating ratio (%) | 60.5 | 60.7 | (0.2) pts | |||||||||||||||||||
[a]As reported to the STB.
Gross and revenue ton-miles – Gross ton-miles are calculated by multiplying the weight of loaded and empty freight cars by the number of miles hauled. Revenue ton-miles are calculated by multiplying the weight of freight by the number of rate miles. Gross ton-miles and revenue ton-miles increased 4% and 7%, respectively, in the first quarter of 2026 compared to 2025, while corresponding carloads decreased 1%. Changes in business mix drove the variances between gross ton-miles, revenue ton-miles, and carloads due to higher coal and grain shipments that are generally heavier and decreased intermodal shipments that are generally lighter.
Freight car velocity – Freight car velocity measures the average daily miles per car on our network. The two key drivers of this metric are the speed of the train between terminals (average train speed) and the time a rail car spends at the terminals (average terminal dwell time). Freight car velocity increased 9% in the first quarter of 2026 compared to 2025 driven by an 11% decrease in terminal dwell and an 8% improvement in train speed.
Locomotive productivity – Locomotive productivity is gross ton-miles per average daily locomotive horsepower available. Locomotive productivity increased 6% in the first quarter of 2026, driven by improved network fluidity and asset utilization as the average active fleet decreased 4% even as gross ton-miles increased.
Train length – Train length is the average maximum train length on a route measured in feet. Even with lower international intermodal volumes, train length increased 3% in the first quarter of 2026 compared to 2025 due to train length improvement initiatives, specifically driven by proprietary technology and mainline capacity investments.
Service performance index (SPI) – SPI is a ratio of the service customers are currently receiving relative to the best monthly performance over the last three years. Measuring our performance relative to a historical benchmark demonstrates our focus on continuously improving service for our customers. Our SPI is calculated for intermodal and manifest products. Intermodal SPI improved 4 points in the first quarter of 2026 compared to 2025. Manifest SPI improved 5 points in the first quarter of 2026 compared to 2025. The improvements in SPI are driven by the continued network fluidity as we adjusted to changing customer demand for higher grain shipments, reduced intermodal shipments, and continued strong coal carloads.
Workforce productivity – Workforce productivity is average daily car miles per employee. Workforce productivity improved 7% in the first quarter of 2026 compared to 2025, as average daily car miles increased 1% while employee levels declined 5% compared to 2025. We continually align our active train, engine, and yard (TE&Y) workforce to meet customer demands in a dynamic economic environment, while maintaining operational fluidity. As a result, our active TE&Y decreased 4% during the first quarter of 2026 on a 1% reduction in carload levels compared to the same period in 2025.
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Operating ratio – Operating ratio is our operating expenses reflected as a percentage of operating revenues. For the first quarter of 2026, our operating ratio of 60.5% improved 0.2 points driven by productivity initiatives and core pricing gains, partially offset by inflation and acquisition-related expenses.
| Debt / net income | ||||||||
| Millions, except ratios for the trailing twelve months ended [1] | Mar. 31, 2026 | Dec. 31, 2025 | ||||||
| Debt | $ | 30,651 | $ | 31,814 | ||||
| Net income | 7,213 | 7,138 | ||||||
| Debt / net income | 4.2 | 4.5 | ||||||
| Adjusted debt / adjusted EBITDA | ||||||||
| Millions, except ratios for the trailing twelve months ended [1] | Mar. 31, 2026 | Dec. 31, 2025 | ||||||
| Net income | $ | 7,213 | $ | 7,138 | ||||
| Add: | ||||||||
| Income tax expense | 2,055 | 2,028 | ||||||
| Depreciation | 2,488 | 2,465 | ||||||
| Interest expense | 1,307 | 1,309 | ||||||
| EBITDA | $ | 13,063 | $ | 12,940 | ||||
| Adjustments: | ||||||||
| Other income, net | (642) | (629) | ||||||
| Interest on operating lease liabilities [2] | 35 | 40 | ||||||
| Adjusted EBITDA (a) | $ | 12,456 | $ | 12,351 | ||||
| Debt | $ | 30,651 | $ | 31,814 | ||||
| Operating lease liabilities | 854 | 1,008 | ||||||
| Adjusted debt (b) | $ | 31,505 | $ | |||||
Recent insider activity
| Date | Insider | Role | Action | Shares | Price | Value |
|---|---|---|---|---|---|---|
| 2026-04-24 | Rocker Kenyatta G | EVP MARKETING & SALES | Sell | -27,387 ×2 | $271.76 | -$7,442,691 |
| 2026-04-24 | Hamann Jennifer L | EVP & CHIEF FINANCIAL OFFICER | Sell | -2,000 | $274.70 | -$549,400 |
Source: SEC Form 4 filings.
Next expected filings
- ~2026-07-23 10-Q expected by 2026-08-09 (in 83 days)
- ~2026-10-22 10-Q expected by 2026-11-08 (in 174 days)
- ~2027-02-05 10-K expected by 2027-03-16 (in 280 days)
- ~2027-04-22 10-Q expected by 2027-05-09 (in 356 days)
Predicted from historical filing cadence; not an SEC commitment.
Recent SEC filings
- 2026-04-23 8-K Earnings Release; Financial Statements and Exhibits
- 2026-04-23 10-Q Quarterly Report
- 2026-02-06 10-K Annual Report
- 2026-01-27 8-K Earnings Release; Financial Statements and Exhibits
- 2025-12-12 8-K Officer/Director Change; Regulation FD Disclosure; Financial Statements and Exhibits
- 2025-11-17 8-K Shareholder Vote Results; Other Events; Financial Statements and Exhibits
- 2025-11-06 8-K Other Events
- 2025-10-23 10-Q Quarterly Report
- 2025-10-23 8-K Earnings Release; Financial Statements and Exhibits
- 2025-09-30 S-4/A S-4/A
- 2025-09-16 S-4 Registration (Merger)
- 2025-07-29 8-K Material Agreement Entered; Financial Statements and Exhibits
- 2025-07-29 8-K Other Events; Financial Statements and Exhibits
- 2025-07-24 10-Q Quarterly Report
- 2025-07-24 8-K Earnings Release; Financial Statements and Exhibits