Weak Volumes Drag Rail Revenue at UP, CSX Despite Pricing Gains

Revenue Performance - Union Pacific and CSX both experienced annual revenue declines of 1 percent, with Union Pacific reporting $6.1 billion and CSX $3.5 billion in operating revenue, as poor volumes offset pricing gains and higher revenues from fuel surcharges [1] - Revenue carloads at Union Pacific fell 4 percent to 2.1 million, while CSX saw a 1 percent increase in volumes to 1.6 million units [2] Net Income and Profitability - Despite the decline in volume, Union Pacific's net income increased by 5 percent to $1.8 billion, while CSX's net income decreased by 2 percent to $720 million [2] Operational Challenges - Both railroads are recovering from disruptions caused by Winter Storm Fern, with Union Pacific expecting full recovery by Thursday and areas in southern states like Texas, Louisiana, and Arkansas being 70 percent recovered [3] - CSX is actively working to restore operations, with some terminals and corridors operating at reduced capacity due to road conditions and crew availability, although all intermodal terminals have reopened [4] Future Outlook - Looking ahead to 2026, both Union Pacific and CSX anticipate a year focused on execution and cost discipline rather than a significant rebound in freight volumes [5] - Union Pacific is targeting mid-single-digit earnings-per-share (EPS) growth off its 2025 base, with a three-year annual growth target of high-single-digit to low-double-digit EPS growth through 2027, alongside planned capital expenditures of $3.3 billion next year [6] - Margin expansion for Union Pacific may not primarily come from rate increases, as rail inflation is expected to rise by 4 percent in 2026; instead, the focus will be on productivity gains such as improved asset utilization and workforce efficiency [7]