Union Pacific's Q1 Earnings and Revenues Lag Estimates

Core Insights - Union Pacific Corporation (UNP) reported first-quarter 2025 earnings of $2.70 per share, slightly missing the Zacks Consensus Estimate of $2.73, but showing a year-over-year improvement of 0.4% due to strong operational efficiency and favorable pricing [1] - Operating revenues were $6.03 billion, falling short of the Zacks Consensus Estimate of $6.09 billion, and reflecting a 0.07% decline year-over-year attributed to lower fuel surcharge revenues and an unfavorable business mix [2] - Freight revenues, which constitute 94.4% of total revenues, increased by 1% to $5.7 billion, supported by a 7% growth in overall volume [3] Financial Performance - Total operating expenses remained flat year-over-year at $3.7 billion, with fuel expenses decreasing by 8% and compensation and benefits expenses falling by 1% [4] - The operating income was stable at $2.4 billion year-over-year, while the operating ratio held steady at 60.7%, although it was negatively impacted by lower fuel prices and a leap year effect [4] Segment Analysis - Bulk freight revenues rose by 1% year-over-year to $1.84 billion, contrary to expectations of a 1.2% decline, with segmental revenue carloads improving by 2% [5] - Industrial freight revenues decreased by 1% year-over-year to $2.08 billion, with revenue carloads also declining by 1% [5] - Premium freight revenues increased by 5% year-over-year to $1.77 billion, surpassing expectations of a 0.6% decrease, with revenue carloads improving by 13% [6] Liquidity and Debt - Union Pacific ended the first quarter of 2025 with cash and cash equivalents of $1.41 billion, up from $925 million in the same quarter of 2024, while debt due after one year decreased to $30.6 billion from $31.2 billion [8] Future Outlook - The company anticipates that volumes will be influenced by a mixed economic environment, fluctuations in coal demand, and challenging year-over-year international intermodal comparisons, while pricing gains are expected to positively impact the operating ratio [10] - Earnings per share growth is aligned with the company's three-year compound annual growth rate (CAGR) target of high-single to low-double digits, with a commitment to maintaining an industry-leading operating ratio and return on invested capital [10] - The long-term capital allocation strategy remains unchanged, with a capital plan of $3.4 billion and share repurchases projected between $4 billion and $4.5 billion [11]