Union Pacific (NYSE:UNP) reported record first-quarter results for 2026, driven by pricing gains, strong operating performance and improved productivity, while management also spent a significant portion of the earnings call addressing the company’s pending merger effort and the timing of a revised regulatory filing.
Record quarter: operating income and net income
Chief Executive Officer Jim Vena said the company “started strong” in 2026, citing first-quarter records in operating income and net income. Union Pacific reported net income of $1.7 billion, up 5% year over year, and earnings per share of $2.87, up 6%. Excluding merger costs, adjusted net income rose 7% and adjusted EPS was $2.93, up 9%, with an operating ratio improvement of 80 basis points to 59.9%, Vena said.
- Fuel surcharge revenue totaled $608 million, up $43 million year over year, reflecting higher fuel prices, Hamann said.
- “Core pricing combined with business mix” was a major contributor to freight revenue improvement, and Hamann said pricing dollars exceeded inflation dollars.
- Business mix was positive, though Hamann noted it was less favorable than expected due to higher volume in lower average revenue per car businesses (including coal and rock) and lower volume in some higher average revenue per car categories (including food and refrigerated and forest products).
On expenses, Hamann said total operating expense increased 3% to $3.8 billion. Compensation and benefits rose 1% as productivity gains and a 5% smaller workforce “almost entirely” offset inflation. Fuel expense increased 7% due to a 7% rise in the average fuel price to $2.69 per gallon from $2.51 per gallon. Purchase services and materials rose 7% due to merger-related costs, while equipment and other rents declined 9% on “record first quarter cycle times,” she said.
Cash flow, leverage, and outlook
Hamann said first-quarter cash from operations totaled $2.4 billion, up 10% from last year, and free cash flow was $630 million after investment spending and dividend payments. Net debt declined by $1.2 billion as the company repaid long-term debt, and Union Pacific ended the quarter with an adjusted debt-to-EBITDA ratio of 2.5x while maintaining A ratings from the three major credit rating agencies, she added.
Looking ahead, Hamann said the company affirmed its 2026 outlook for reported EPS growth in the “mid-single digits” and operating ratio improvement. She also flagged fuel volatility as a key swing factor. While the company’s original diesel fuel estimate was $2.35 per gallon, Hamann said it had become “much harder to predict” and that in April the company was paying “a little north of $4 a gallon,” which she said would pressure margins, especially in the second quarter.
Hamann also clarified language around the outlook after a question from Bank of America’s Ken Hoexter. She said Union Pacific is now explicitly discussing EPS growth on a reported basis, which includes the headwind from merger costs “that we didn’t originally anticipate,” as well as the fact that the company is not repurchasing shares at the moment.
Demand trends: bulk strength offsets premium weakness
Executive Vice President of Marketing and Sales Kenny Rocker said first-quarter freight revenue grew 4% and would have been up 3% excluding fuel surcharge, both first-quarter records. He said core pricing gains, higher fuel surcharge revenue and favorable mix more than offset the 1% decline in volume.
By segment, Rocker highlighted strength in Bulk and Industrial, while Premium declined due largely to international intermodal weakness.
- Bulk: Revenue rose 10% on 12% higher volume. Rocker said coal benefited from sustained utility demand and favorable natural gas pricing, supported by “strong service execution” and new business with LCRA that began in April 2025. Grain delivered record first-quarter volume, driven by export demand, including a rebound in shipments to China and expansion into Mexico, including Bartlett’s facility in Monterrey, he said.
- Industrial: Revenue rose 5% on 4% higher volume, delivering a record first quarter. Rocker said strong core pricing drove a “best-ever” quarterly average revenue per car. He cited demand tied to construction projects linked to new LNG terminals and data centers, along with strength in petrochemicals on new business wins and improved demand.
- Premium: Revenue declined 5% on a 9% drop in volume, partially offset by a 4% increase in average revenue per car. Rocker said international intermodal volumes fell 28% due to lower West Coast imports and customer shifts. He added that domestic intermodal posted its third consecutive record quarter, and automotive volumes were pressured by softer vehicle sales, though wins with BMW offset some of the market softness.
On the outlook, Rocker said he remained optimistic on coal’s full-year potential and expected grain to benefit from improving export demand to China and momentum into Mexico. He also said industrial markets remain supported by customer wins, including interest in the upcoming third-quarter startup of the Golden Triangle Polymers joint venture with CP Chem. For Premium, Rocker said international intermodal volumes should remain subdued but would lap some of last year’s volume shifts, while domestic intermodal should continue to benefit from over-the-road conversions enabled by Union Pacific’s service.
Operational performance: records across key metrics
Executive Vice President of Operations Eric Gehringer said the quarter reflected the company’s focus on “safety, service and operational excellence.” He said the railroad improved employee safety and derailments versus their respective three-year rolling averages and posted first-quarter records across six key performance and efficiency metrics.
Gehringer said freight car velocity increased 9% to 235 miles per day, driven by “best ever” terminal dwell of 19.7 hours, 11% better than last year. For service, he said both intermodal and Manifest Service Performance Index finished at 98%, improving 4 and 5 points, respectively.
Gehringer also cited productivity improvements in assets and labor:
- Locomotive productivity improved 6% in what he called a best-ever quarter, while the average active locomotive fleet declined 4% despite higher gross ton miles.
- Workforce productivity increased 7%, and the active train engine and yard workforce declined 4% on a 1% reduction in carload levels.
- Train length increased 3%, supported by proprietary tools such as Physics Train Builder and mainline investments, Gehringer said.
On capacity, Gehringer told Evercore’s Jonathan Chappell the railroad has “latent capacity,” driven in part by longer trains and ongoing spending of $500 million to $700 million annually on capacity projects such as siding extensions and terminal expansion. Vena added that the network is being operated with a “buffer” of resources, noting that the company was running “over 100 locomotives on the main line less” due to improved speed and efficiency.
Merger and technology: revised filing, timing, and integration approach
Vena said Union Pacific was “100% on track” to file a revised merger application on April 30 and expressed confidence the additional information would meet the Surface Transportation Board’s expectations. In response to Wolfe Research’s Scott Group, Vena said management was “more convicted now than we ever have been” about the combination’s merits, while acknowledging the process was taking longer than he would like.
In Q&A, Vena said the company was working off STB timing that implies an approval decision in the second quarter of next year. He also pushed back on the idea that major concessions would be necessary, calling the transaction “truly an end-to-end merger” with only a “small little piece of overlap” affecting a “handful” of customers. He said Union Pacific was speaking with customers and competitors, but added the company was “not prepared to really give concessions” that would “just open up our railroad for no reason at all.”
Union Pacific also addressed concerns about integration and the use of technology. Gehringer said prior merger issues were often linked to technology integration pace and change management, and argued conditions are different today. He pointed to Union Pacific’s successful cutover to its NetControl transportation system less than two years ago, saying it occurred without customer disruption. Gehringer said the company expects to operate the two railroads “largely independently” initially and then integrate in a step-by-step manner.
Separately, Gehringer described how Union Pacific is using AI-enabled tools, including an “Automated Movement Planner” to support dispatching and a “Terminal Command Center” to improve terminal decision-making and identify issues earlier. Vena said the company is also working on technology to make locomotives “even more autonomous” to improve fuel conservation, though he said it is “not yet today.”
Closing the call, Vena reiterated confidence in the company’s performance and said Union Pacific remains focused on operating the railroad at a high level while advancing the merger application process.
About Union Pacific (NYSE:UNP)
Union Pacific Corporation (NYSE: UNP) is one of the largest freight railroad companies in the United States. Its principal operating subsidiary, Union Pacific Railroad, has roots that trace back to the Pacific Railway Act of 1862 and the construction of the first transcontinental rail link completed in 1869. The company is headquartered in Omaha, Nebraska, and operates as a holding company for rail transportation and related services.
Union Pacific’s core business is the movement of freight by rail across an extensive rail network serving the western two‑thirds of the United States.
