Union Pacific Corporation
UNP · NYSE
Next quarter
Reports Oct 22, 2026.
Consensus is $3.43 EPS for Sep 2026 across 6 estimates, ranging $3.41 to $3.48.
UNP Jun 2026
- 6.56%
- +0.98%
- $3.20
- $3.41
- —
- $6.86B
Reported results
- $6.86B
- $2.76B
- 40.25%
- $1.99B
- $3.36
Highlights
- Adjusted earnings: Adjusted diluted EPS was $3.41, 6.6% above the $3.20 consensus and 13% above $3.03 a year ago; GAAP diluted EPS was $3.36 versus $3.15.
- Revenue growth: Operating revenue reached a record $6.86 billion, up 12% year over year and 10% from $6.22 billion in the first quarter; freight revenue excluding fuel surcharge increased 4%.
- Volume and mix: Freight revenue carloads rose 2% year over year to 2.16 million, led by 19% growth in domestic intermodal and 12% growth in grain, while coal carloads fell 14% and international intermodal declined.
- Fuel surcharge: Fuel surcharge revenue increased to $1.0 billion from $569 million, reflecting higher fuel prices and volume; average diesel cost rose 60% to $3.86 per gallon.
- Profitability: Operating income increased 9% year over year to $2.76 billion, but the reported operating ratio worsened 70 basis points to 59.7%; higher fuel prices alone were an unfavorable 120 basis points.
- Execution: Freight car velocity improved 5% to 231 daily miles per car, terminal dwell improved 7% to 19.7 hours, and workforce productivity rose 5% to 1,176 car miles per employee.
- Cash generation: First-half operating cash flow rose 21% to $5.52 billion and free cash flow increased to $1.81 billion from $1.11 billion; the full-year capital plan remains approximately $3.3 billion.
- Norfolk Southern transaction: Union Pacific said it remains prepared to advance the proposed acquisition, with the STB accepting the revised application as complete in May but requiring supplemental information; closing is currently expected in 2027.
Analysis
Union Pacific delivered a strong second quarter against expectations, with adjusted diluted EPS of $3.41 beating the $3.20 consensus by 6.6%. GAAP diluted EPS rose 7% year over year to $3.36, while net income increased 6% to $1.99 billion. The quarter also accelerated from the first quarter: revenue rose from $6.22 billion to $6.86 billion, operating income from $2.46 billion to $2.76 billion, net income from $1.70 billion to $1.99 billion, and EPS from $2.87 to $3.36.
The print was defined by a broad improvement in freight demand and execution, particularly domestic intermodal and grain, alongside a substantial fuel-surcharge benefit. Freight revenue increased 12%, although revenue excluding fuel surcharge rose a more modest 4%, and the operating ratio deteriorated to 59.7% from 59.0% a year ago as fuel prices, inflation, volume-related costs and $35 million of acquisition expenses offset productivity gains. Operational metrics were nevertheless constructive, with velocity, dwell, train length and workforce productivity all improving. Management raised its reported EPS-growth outlook to high-single digits and maintained the $3.3 billion capital plan, while the pending Norfolk Southern combination remains the principal strategic and regulatory overhang.
Freight demand and pricing
Union Pacific's top line benefited from both higher demand and fuel pass-through, but the underlying growth rate was more measured than the headline freight increase. Freight revenue rose 12% to $6.52 billion, while freight revenue excluding fuel surcharge increased 4%. Total carloads grew 2% and average revenue per car increased 9% to $3,014, reflecting core pricing, fuel surcharges and mix.
- Premium: Revenue increased 21% to $2.09 billion. Intermodal revenue rose 26% to $1.39 billion on 4% higher carloads, including 19% domestic intermodal growth, while international intermodal volumes declined.
- Bulk: Revenue grew 7% to $2.04 billion despite 1% fewer carloads. Grain revenue increased 15% to $1.11 billion, more than offsetting a 4% decline in coal revenue.
- Industrial: Revenue rose 8% to $2.39 billion, with metals and minerals up 11% and industrial chemicals and plastics up 6%.
- Mexico: Revenue from shipments to and from Mexico increased 10% to $828 million, supported by 5% volume growth, higher fuel surcharge revenue and pricing.
Operations and margins
The operating backdrop improved even as costs rose sharply. Freight car velocity reached 231 daily miles, terminal dwell fell to 19.7 hours and average train length increased 2% to 9,890 feet. Workforce productivity improved 5% while average employees declined 3% to 28,786, helping absorb higher demand. Intermodal and manifest service performance indexes were 95%, down from 99% and 97%, respectively, against the prior-year comparison benchmarks.
- Cost pressure: Operating expenses increased 13% to $4.10 billion. Fuel expense rose 63% to $938 million, purchased services and materials increased 10% to $709 million, and other expense increased 13% to $362 million.
- Fuel impact: Average diesel cost increased to $3.86 per gallon from $2.42, while the fuel consumption rate improved 1% to 1.051 gallons per thousand gross ton-miles.
- Operating ratio: The reported ratio was 59.7%, up 70 basis points year over year but down from 60.5% in the first quarter. The adjusted ratio was 59.2%, including a 50-basis-point benefit from excluding $35 million of acquisition costs.
Cash generation and capital
Cash generation strengthened materially in the first half, aided by higher earnings and lower income taxes paid. Operating cash flow was $5.52 billion versus $4.54 billion a year earlier, while capital investments were broadly stable at $1.81 billion. After investing and dividends, free cash flow was $1.81 billion, up from $1.11 billion.
- Capital plan: Union Pacific maintained an approximately $3.3 billion 2026 capital plan focused on infrastructure replacement, network capacity, locomotives, freight cars and technology.
- Shareholder returns: Dividends declared increased 3% year over year to $1.38 per share. Share repurchases remain paused because of the Norfolk Southern transaction.
- Balance sheet: Debt was $30.3 billion at June 30, down from $31.8 billion at year-end, and adjusted debt to adjusted EBITDA improved to 2.5x from 2.7x.
Norfolk Southern transaction
The proposed Norfolk Southern acquisition remains central to Union Pacific's strategic agenda and capital-allocation decisions. The transaction would involve issuing approximately 225 million Union Pacific shares and paying roughly $20 billion in cash, funded through new debt and accumulated operating cash. Union Pacific shareholders and Norfolk Southern shareholders approved the deal in November 2025, but completion still requires Surface Transportation Board approval and other conditions.
- Regulatory process: The STB accepted the revised joint application as complete on May 28, 2026, while holding proceedings in abeyance and requiring supplemental information by July 27. The companies submitted the first portion of that information on July 7.
- Timing and costs: Closing is currently expected in 2027. Union Pacific recorded $35 million of acquisition-related expense in the quarter and $71 million year to date, versus $1 million in the comparable 2025 periods.
- Capital discipline: The pending deal has prompted a pause in share repurchases, although Union Pacific ended the quarter with $1.6 billion of cash, $500 million of short-term investments and $2.0 billion of available revolving credit.
Updated 2026 outlook
Management improved its reported EPS-growth outlook to high-single-digit growth, citing stronger customer demand and continued execution despite a mixed economic forecast. It reaffirmed pricing dollars above inflation, operating-ratio improvement, strong cash generation, consistent annual dividend increases and the $3.3 billion capital plan. The company said the revised outlook remains consistent with its Investor Day target of a high-single-digit to low-double-digit EPS compound annual growth rate through 2027.
