Union Pacific Corporation
UNP · NYSE
UNP · NYSE
Expected to report Jan 26, 2027 — estimated from last year’s reporting date.
Consensus is $3.31 EPS for Dec 2026 across 7 estimates, ranging $3.18 to $3.47.
Union Pacific delivered a volume-led record quarter, with adjusted diluted EPS of $3.53 beating the $3.47 consensus by 6 cents, or 1.73%. GAAP diluted EPS was $3.49, up 16% from $3.01 a year ago; revenue reached $7.20 billion, 15% higher, while operating income rose 15% to $2.94 billion and net income increased 16% to $2.08 billion. Sequentially, revenue advanced from $6.86 billion in Q2, operating income from $2.76 billion and diluted EPS from $3.36, extending the year’s rising trend.
The central story was the ability to handle 6% more carloads while sustaining pricing and productivity, even as fuel costs surged. Freight revenue excluding fuel surcharge grew 6%, but fuel surcharge revenue doubled to $1.2 billion and the average locomotive fuel price rose 64% year over year. That pressure kept adjusted operating ratio from matching the modest improvement in the GAAP ratio: adjusted OR was 58.8%, 30 basis points worse year over year, while reported OR improved 10 basis points to 59.1%. Productivity gains supported service and cost control, though service indices declined against a high prior-year benchmark. Management affirmed its high-single-digit 2026 reported EPS growth outlook and $3.5 billion capital plan, while the Norfolk Southern merger review remains a major strategic and capital-allocation consideration.
Freight revenue increased 15% to $6.81 billion, reflecting higher fuel surcharges, 6% carload growth and core pricing gains, partly offset by mix. Excluding fuel surcharges, freight revenue grew 6%; average revenue per car rose 8% to $2,971. Fuel surcharge revenue reached $1.2 billion versus $602 million a year earlier, so reported freight growth considerably exceeded underlying growth excluding fuel.
Operating expenses rose 15% to $4.25 billion, matching revenue growth. Fuel expense increased 69% to $1.04 billion as the average locomotive fuel price reached $4.21 per gallon, up from $2.56. Improved fuel efficiency, higher workforce productivity and lower acquisition-related costs helped absorb the increase, but management said fuel prices adversely affected the operating ratio by 140 basis points.
The railroad handled higher demand while improving several operating measures. Workforce productivity rose 5% to a record 1,219 car miles per employee, with average employment down 1% to 28,540. Train length increased 2% to 9,969 feet, while freight car velocity improved 1% to 228 daily miles per car and average terminal dwell fell 2% to 19.9 hours.
Management affirmed its 2026 outlook despite a mixed economic forecast, pointing to customer demand, pricing dollars in excess of inflation and continued cash generation. The company expects high-single-digit reported EPS growth, consistent with its high-single- to low-double-digit three-year EPS CAGR target through 2027. It also said high fuel prices are making reported operating-ratio improvement more difficult, even as it targets improvement from the core business.
The proposed Norfolk Southern acquisition remains an important strategic and financial backdrop. The STB adopted a procedural schedule in August and denied dismissal motions in September, advancing the review without resolving the approval process. The companies expect completion in the second half of 2027, subject to STB approval and other conditions. Union Pacific expects the transaction to require approximately 225 million new shares and $20 billion in cash consideration, and has paused share repurchases while the deal is pending.
For the first nine months of 2026, operating cash flow increased 18% to $8.30 billion, while capital investments were $2.83 billion. Free cash flow, as defined by the company after investing activity and dividends, rose to $2.36 billion from $1.86 billion a year earlier. The company ended September with $2.21 billion of cash and cash equivalents and $875 million of short-term investments; debt was $30.3 billion, and adjusted debt to adjusted EBITDA was 2.4 times.
