Union Pacific (NYSE:UNP) executives highlighted record full-year safety, service, and operating performance in 2025 while outlining a more muted macro backdrop for 2026 and providing updates on the company’s planned merger with Norfolk Southern during the company’s fourth-quarter earnings call on January 27.
Weather disruption and network recovery
CEO Jim Vena opened the call by noting a significant winter weather event that impacted much of the U.S., with Union Pacific feeling the greatest effects in the southern region. Chief Operating Officer Eric Gehringer said the railroad was “pretty much 70% recovered,” particularly across Texas, Louisiana, and Arkansas, and management expected operations to be “back” by Thursday morning.
Full-year 2025 results: revenue record and operating ratio improvement
Vena said Union Pacific delivered its “best ever full year across safety, service, and operating excellence” in 2025. The company reported full-year net income of $7.1 billion, up 6%, and earnings per share of $11.98, up 8%.
Management said 2025 freight revenue excluding fuel surcharge rose 3% versus 2024 and set a full-year record. Vena attributed the result to “strong core pricing gains” and an additional 113,000 rail cars, which more than offset business mix effects. The company’s adjusted operating expenses were described as roughly flat year-over-year after merger costs and other one-time items, despite business growth and inflationary pressures.
Union Pacific also cited record productivity, saying it used 3% fewer employees to move 1% more volume. Vena pointed to improvements such as reduced dwell and fewer car touches, while Gehringer highlighted network fluidity gains. Vena said the adjusted operating ratio improved 60 basis points to 59.3% for the full year.
Other income increased in part due to industrial parkland sales, which Vena said reflected the company’s willingness to monetize assets when opportunities arise.
Fourth-quarter performance: lower volumes, record reported EPS
Hamann reported fourth-quarter operating revenue of $6.1 billion, down 1% from the prior year, with freight revenue of $5.8 billion also down 1% on 4% lower volume. She said the volume decline reduced freight revenue by 400 basis points, while fuel surcharge revenue of $603 million increased by $15 million due to higher fuel prices. Core pricing gains and business mix contributed 275 basis points to freight revenue, though Hamann said quarterly pricing and mix were pressured by competitive and global market conditions, “particularly in agricultural.”
On costs, total operating expense rose 2% to $3.7 billion. Compensation and benefits fell 3% due to a favorable comparison to a $40 million crew staffing agreement in the prior-year quarter, while workforce levels were 5% lower than 2024. Hamann said compensation per employee increased 5% due to wage inflation and higher guarantee payments, and she expects all-in compensation per employee to rise about 4% to 5% in 2026.
Purchased services and materials increased 8%, driven by merger-related costs, inflation, and higher maintenance and repair. Other expense climbed 22% to $344 million, reflecting higher casualty costs and rising property taxes, as well as comparison to a 2024 bad-debt adjustment. Operating income declined 5% to $2.4 billion, but other income rose $264 million to a best-ever quarterly level, driven primarily by industrial parkland sales.
Hamann said reported net income was $1.8 billion, a fourth-quarter record, with earnings per share of $3.11. Adjusted EPS was $2.86, and adjusted operating ratio was 60%.
Business trends and 2026 outlook: softer indicators, focus on productivity
Marketing chief Kenny Rocker said fourth-quarter freight revenue was down slightly on the 4% volume decline, but pricing offset some pressure and average revenue per car increased 4% when including fuel surcharges and business mix. In the bulk segment, revenue rose 3% on 3% higher volume, supported by coal demand and favorable natural gas pricing. Rocker said grain was pressured by lower domestic demand and reduced soybean exports to China, partly offset by business development wins in Mexico. He also cited uncertainty around the renewable fuel tax credit as a factor tempering grain products growth tied to renewable fuels and feedstocks.
Industrial revenue increased 1% on 1% higher volume, with pricing gains offset by mix. Premium revenue declined 6% as intermodal volumes were challenged by lower West Coast imports and customer shifts. Rocker said domestic intermodal posted a best-ever year in 2025 and delivered another record-breaking quarter, driven by service performance and business wins, while automotive volumes fell due to reduced OEM production tied to softer consumer demand and quality holds.
Gehringer said Union Pacific improved both personal injury and derailment rates in the quarter compared to its three-year rolling average, and he said full-year 2025 was a best-ever result in both measures. Operational metrics also improved, including freight car velocity of 239 miles per day (a best-ever quarterly record) and record terminal dwell of 19.8 hours. Intermodal and manifest service performance both finished at 100%, and management said the Service Performance Index will be rebased to the company’s best monthly performance going forward.
For 2026, management said it does not anticipate a significant economic upswing. Hamann cited S&P Global’s January outlook, noting deteriorating forecasts since the company set three-year targets in September 2024, including weaker estimates for industrial production, housing starts, and auto sales. She also said rail inflation is “ticking up again,” with slightly over 4% inflation expected in 2026. Hamann emphasized the company’s goal that “price dollars…exceed inflation dollars,” but cautioned that price “may not be a driver” of margin improvement in 2026.
Hamann guided to mid-single-digit earnings growth in 2026, and later clarified in Q&A that this outlook is based on 2025 reported EPS of $11.98. She said Union Pacific expects to improve operating ratio versus 2025 and remain an industry leader in operating ratio and return on invested capital, while continuing consistent annual dividend increases. The company is targeting approximately $3.3 billion of capital spending in 2026, with investments focused on core infrastructure, locomotive modernization, freight cars, and targeted capacity projects, including siding extensions in the Pacific Northwest and along the Sunset Route, terminal work around Houston and the Gulf Coast, and intermodal capacity investments at Inland Empire and Phoenix.
Merger and regulatory process
Vena addressed the proposed merger with Norfolk Southern, saying Union Pacific was disappointed the Surface Transportation Board requested additional information after the company provided close to 7,000 pages. He characterized the request as a procedural step and said the STB’s questions focus on three areas requiring clarification. Management expects the response to take “a few weeks” and said the company remains on track to target closing in the first half of 2027.
In Q&A, executives discussed merger-related traffic growth assumptions and operational capacity. Vena said the company is “very comfortable” with the traffic estimates in its application and described the additional trains as a small increment compared to the more than 2,000 movements on Union Pacific’s network. Gehringer said the merger represents about a 6% increase in operating inventory for the combined entity and cited existing capacity buffers and past investments as supports for handling growth.
Vena also addressed potential changes in switching regulation and broader regulatory scrutiny, saying he supports increased competition and shipper optionality, provided changes are applied across the industry and designed to improve customer outcomes rather than add complexity and dwell. He said he is not concerned that STB actions would “wreck this industry,” arguing that rail competes broadly with trucking and other transportation modes.
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.
