Group 1 - Union Pacific (NYSE: UNP) is a core holding in a limited portfolio, maintained for nearly a decade [1] - The investment strategy focuses on stocks selling below fair value estimates, with an emphasis on dividend growth and income [1] - Fundamental analysis is supplemented by technical charts, and options strategies are used primarily for income generation or risk hedging [1]

Core Viewpoint - Union Pacific Corporation reported strong financial performance in the third quarter, highlighting double-digit growth in operating income and overall positive business momentum [5]. Financial Performance - The company achieved an 11% growth in operating income during the third quarter [5]. - There was also a 10% growth in another unspecified financial metric, indicating robust operational efficiency and demand [5]. Conference Details - The conference featured key executives from Union Pacific, including Jennifer Hamann, Executive Vice President and Chief Financial Officer, and Rahul Jalali, Executive Vice President and Chief Information Officer [2][3]. - The session was part of the Baird 2024 Global Industrial Conference, indicating the company's engagement with investors and stakeholders [1].

Union Pacific Corporation Conference Call Summary Company Overview - **Company**: Union Pacific Corporation (NYSE: UNP) - **Participants**: Jennifer Hamann (CFO), Rahul Jalali (CIO), Garrett Holland (Robert W. Baird & Co.) Key Points Financial Performance - **Q3 Performance**: Achieved 11% growth in operating income and 10% growth in earnings per share (EPS) [5][10] - **Volume Growth**: Reported a 6% increase in volume, primarily driven by a 33% increase in international intermodal volumes [7][12] - **Revenue Growth**: Freight revenue growth, excluding fuel, was 5% [7] - **Operating Ratio**: Improved by 310 basis points to 60.3%, marking the third consecutive quarter of industry-leading performance [10][11] Strategic Focus - **Core Strategy**: Emphasizes safety, service, and operational excellence as fundamental components of the business [6] - **Service Improvement**: Noted improvements in freight car dwell and freight velocity, indicating enhanced service delivery [13][14] - **Workforce Productivity**: Achieved all-time best productivity metrics in September and Q3 [14] Growth Opportunities - **Revenue Pipeline**: Identified a pipeline of $1.6 billion in revenue opportunities from approximately 200 track construction projects [19] - **Market Segments**: Focus on truckload conversion, access to Mexico, petrochemicals, and grain products as key growth areas [20][22][23] - **Long-term Contracts**: 75% of long-term contracts have been repriced since 2022, with expectations for further adjustments [25][26] Pricing Strategy - **Pricing Dynamics**: Core pricing continues to exceed inflation, with expectations for pricing to become accretive to margins starting in 2025 [30][52] - **Customer Engagement**: Emphasizes the importance of providing value to customers to facilitate pricing discussions and increase market share [52] Technology and Innovation - **Tech Investments**: Implemented advanced technology systems, including AI and machine learning, to enhance operational efficiency [42][44] - **Customer Visibility**: Launched a pilot program for a visibility solution called "Customer Vision" to improve customer experience [48][49] Market Outlook - **2025 Guidance**: Anticipates moderate growth in volumes and revenue, with a focus on maintaining industry leadership in operating ratio [29][31][61] - **Economic Indicators**: Current outlook suggests incremental growth rather than dramatic shifts in the market [61] Capital Allocation - **Shareholder Returns**: Plans to return $4 billion to $5 billion in shares to shareholders annually over the next three years, alongside consistent annual dividend increases [32] Regulatory Environment - **Regulatory Impact**: Acknowledges the potential for regulatory changes to positively impact the business, though specifics remain uncertain [39] Conclusion - **Overall Sentiment**: The company expresses optimism about future growth and the execution of its strategic initiatives, positioning itself well for sustained performance in the industry [33][66]

Core Viewpoint - The article discusses the author's investment strategy focusing on dividend stocks, specifically highlighting Union Pacific (NYSE: UNP) as a significant investment choice made in 2020 [1]. Group 1: Investment Strategy - The company has committed to investing all available funds and future cash flows into dividend stocks since 2020 [1]. - Union Pacific was one of the first stocks purchased under this investment strategy, indicating its perceived value and potential for returns [1]. Group 2: Analyst's Position - The author holds a beneficial long position in Union Pacific shares, which may include stock ownership, options, or other derivatives [1]. - The article reflects the author's personal opinions and is not influenced by external compensation, emphasizing an independent analysis [1].

Core Viewpoint - Union Pacific is considered a valuable investment opportunity despite recent stock price declines and earnings misses, primarily due to its strong infrastructure assets and consistent dividend payments [1][11]. Financial Performance - Union Pacific's stock has decreased by over 8% in the last three years, reflecting challenges in its financial performance [3]. - Operating revenue for Q1-Q3 2024 was reported at $18.1 billion, with total operating expenses at $10.9 billion, resulting in an operating income of $7.19 billion and an operating margin of 39.7% [9][10]. - Revenue growth has been modest, while operating margins have declined due to inflationary pressures affecting costs, including fuel and labor [4][6]. Dividend and Shareholder Returns - The company has a dividend yield of 2.3%, with a projected dividend payment of $5.28 per share for 2024, up from $5.20 in 2023, marking a 3% increase [2][11]. - Union Pacific has a strong track record of dividend payments, having raised its dividend annually since 2008 and maintained a payout ratio just under 50%, indicating affordability even in the face of declining earnings [11][12]. - Over the past decade, the company has increased its dividend by 168% and reduced its outstanding share count by 31.4%, contributing to faster growth in earnings per share (EPS) compared to net income [12]. Capital Investments - Union Pacific plans to invest $3.4 billion in capital expenditures in 2024, focusing on infrastructure upgrades and equipment, which is consistent with its previous investment levels [7][8]. Market Position and Industry Context - The railroad industry is characterized by high operational efficiency, and Union Pacific benefits from a diverse revenue mix, transporting various bulk and industrial products [5][6]. - Despite cyclical demand fluctuations tied to macroeconomic conditions, railroads generally maintain high operating margins, which supports Union Pacific's profitability [6][7]. Valuation - Union Pacific's current price-to-earnings (P/E) ratio is 21.2, which is within its historical range of 20.3 to 22.1, suggesting it is fairly valued relative to its historical performance [13].

Financial Performance - The company reported earnings of $2.75 per diluted share on net income of $1.7 billion, with an operating ratio of 60.3% for Q3 2024, compared to earnings of $2.51 per diluted share and net income of $1.5 billion with an operating ratio of 63.4% in Q3 2023[72]. - Operating income rose by 11% to $2.4 billion, while operating expenses decreased by 2% due to productivity gains and lower fuel prices[75]. - The total revenue for the nine months ended September 30, 2024, was $18.129 billion, reflecting a 1% increase compared to $17.960 billion in the same period of 2023[76]. - Net income for the trailing twelve months ended September 30, 2024, was $6,637 million, up from $6,379 million in the previous year[110]. - Cash provided by operating activities increased to $6,684 million in the first nine months of 2024, compared to $5,984 million in the same period of 2023[113]. - Free cash flow for the same period was $1.855 billion, significantly up from $954 million in 2023, indicating a 94.5% increase[119]. Revenue and Freight Metrics - Freight revenues increased by 4% in Q3 2024 to $5.768 billion, driven by a 6% volume increase and core pricing gains, despite a negative mix and lower fuel surcharge revenues[72][77]. - International intermodal business surged by 33% year-over-year, contributing to improved operating metrics, including a 5% increase in freight car velocity and locomotive productivity[73]. - Grain and grain products revenue increased by 12% to $923 million in Q3 2024, while coal and renewables revenue decreased by 17% to $405 million[81]. - The company experienced a 6% increase in total revenue carloads to 2.167 million in Q3 2024 compared to 2.052 million in Q3 2023[82]. - Premium freight revenues rose by 33% in Q3 2024 compared to Q3 2023, driven by increased international intermodal demand and business development efforts[87]. - Revenues from Mexico business increased by 7% to $724 million in Q3 2024, supported by a 2% volume increase and a 5% increase in ARC[88]. Operating Efficiency - The operating ratio improved by 3.1 points from Q3 2023, indicating enhanced operational efficiency[75]. - Workforce productivity improved by 12%, with total train, engine, and yard employees remaining flat year-over-year[73]. - Total operating expenses decreased by 2% in Q3 2024 to $3,675 million compared to $3,764 million in Q3 2023, driven by productivity and lower fuel prices[89]. - Fuel expenses decreased by 13% in Q3 2024, with locomotive diesel fuel prices averaging $2.60 per gallon compared to $3.12 in Q3 2023[93]. - Gross ton-miles increased by 4% to 216.0 billion in Q3 2024 compared to Q3 2023, while revenue ton-miles rose by 1% to 104.0 billion[102]. - Freight car velocity improved by 5% in Q3 2024, with average daily miles per car reaching 210 miles[104]. Cash Flow and Investments - Total cash capital investments for the first nine months of 2024 were $2,530 million, slightly down from $2,582 million in 2023[115]. - The capital plan for 2024 is expected to be approximately $3.4 billion, an 8% decrease from 2023[117]. - The cash flow conversion rate improved to 83% in 2024 from 72% in 2023, reflecting enhanced efficiency in converting net income to cash flow[120]. - During Q3 2024, the company generated $2.7 billion in cash from operating activities and repurchased $738 million in shares[121]. - As of September 30, 2024, the company had $947 million in cash and cash equivalents, with $2.0 billion available under its revolving credit facility[121]. Debt and Financial Obligations - Interest expense decreased by 6% in Q3 2024 to $314 million, attributed to a lower weighted-average debt level of $31.4 billion[99]. - Total contractual obligations as of September 30, 2024, amounted to $62.303 billion, with debt obligations comprising $58.298 billion[123]. - The company expects to remain in compliance with its debt covenants despite potential economic fluctuations[121]. - Adjusted debt to adjusted EBITDA ratio improved to 2.7 in September 2024, down from 3.0 in December 2023[110]. Taxation - Income tax expense increased by 23% in Q3 2024 to $518 million, driven by higher pre-tax income and lower deferred tax adjustments[100]. - The effective tax rate for year-to-date 2024 was 23.5%, up from 21.9% in 2023[100]. Future Outlook - There are no known trends or uncertainties that could materially adversely affect the company's financial condition or liquidity as of the reporting date[122]. - The company continues to evaluate its financial condition and liquidity under various economic scenarios to ensure sufficient cash generation capabilities[121]. - Forward-looking statements indicate potential impacts from geopolitical tensions and public health crises, which may affect future operations and financial results[125].

Core Insights - Union Pacific Corporation (UNP) reported third-quarter 2024 earnings of $2.75 per share, slightly missing the Zacks Consensus Estimate of $2.76 per share, but showing a year-over-year improvement of 9.6% due to strong operational efficiency and favorable pricing [1] - Operating revenues reached $6.09 billion, falling short of the Zacks Consensus Estimate of $6.19 billion, yet reflecting a 2.5% year-over-year increase driven by core pricing gains and higher volumes [2] - Freight revenues, which constitute 94.7% of total revenues, increased by 4% to $5.77 billion, surpassing the estimate of $5.72 billion, while other revenues decreased by 18% to $323 million [2] Financial Performance - The operating income rose by 11% year over year to $2.4 billion, with total operating expenses declining by 2% to $3.68 billion [2] - Fuel expenses decreased by 13%, and expenses on purchased services and materials fell by 4%, contributing to the overall reduction in operating expenses [2] - The operating ratio improved by 310 basis points year over year to 60.3%, aided by lower quarterly fuel prices which positively impacted the ratio by 120 basis points [3] Segment Performance - Bulk freight revenues amounted to $1.80 billion, a 2% increase year over year, despite a projected decline of 0.3% [4] - Industrial freight revenues totaled $2.12 billion, up 3% year over year, while Premium division freight revenues increased by 7% to $1.84 billion, with Premium revenue carloads improving by 14% year over year [4] Liquidity and Outlook - Union Pacific ended the third quarter of 2024 with cash and cash equivalents of $947 million, down from $1.06 billion at the end of 2023, while debt decreased to $29.76 billion from $31.16 billion [5] - The company anticipates fourth-quarter results to be consistent with the third quarter, with expectations for year-over-year improvement compared to the fourth quarter of 2023 [6] - Management plans to repurchase approximately $1.5 billion in shares in 2024 and forecasts capital expenditures of $3.4 billion for the year [6]

Union Pacific (UNP) reported $6.09 billion in revenue for the quarter ended September 2024, representing a year-over-year increase of 2.5%. EPS of $2.75 for the same period compares to $2.51 a year ago.The reported revenue represents a surprise of -1.58% over the Zacks Consensus Estimate of $6.19 billion. With the consensus EPS estimate being $2.76, the EPS surprise was -0.36%.While investors scrutinize revenue and earnings changes year-over-year and how they compare with Wall Street expectations to determi ...

Exhibit 99.1 Union Pacific Reports Third Quarter 2024 Results ● Third quarter earnings per diluted share of $2.75, up 10% ● Third quarter operating income up 11% ● Third quarter net income up 9% Omaha, Neb., October 24, 2024 – Union Pacific Corporation (NYSE: UNP) today reported 2024 third quarter net income of $1.7 billion, or $2.75 per diluted share. This compares to 2023 third quarter net income of $1.5 billion, or $2.51 per diluted share. "Our third quarter results demonstrate the success of our strateg ...

I focus on long term growth and dividend growth investing. I follow both the US and the European stock markets, looking for undervalued stock and/or for high quality dividend growing companies that provide me with cash to reinvest. Over time, I have come to realize that profitability is a much safer driver of gains than low valuation. As a result, I give utmost importance to margins, free cash flow stability and growth, and returns on invested capital. I research stocks within my areas of competence and whe ...