Union Pacific's Q1 Earnings and Revenues Lag Estimates

Union Pacific Corporation’s UNP first-quarter 2025 earnings of $2.70 per share missed the Zacks Consensus Estimate of $2.73. However, the bottom line improved 0.4% on a year-over-year basis. The year-over-year increase was due to strong operational efficiency and favorable pricing.

Operating revenues of $6.03 billion lagged the Zacks Consensus Estimate of $6.09 billion. The top line declined 0.07% on a year-over-year basis due to lower fuel surcharge revenues, an unfavorable business mix and lower other revenues.

Union Pacific Corporation Price, Consensus and EPS Surprise

Union Pacific Corporation price-consensus-eps-surprise-chart | Union Pacific Corporation Quote

Freight revenues, accounting for 94.4% of the top line, increased 1% to $5.7 billion aided by the 7% overall volume growth. The actual freight revenue figure was in line with our estimate of $5.7 billion.  Other revenues decreased 19% to $336 million in the first quarter of 2025. Business volumes, measured by total revenue carloads, increased 7% year over year.

The operating income remained flat year over year at $2.4 billion.

Total operating expenses of $3.7 billion remained flat year over year. Fuel expenses plunged 8%. Expenses on compensation and benefits fell 1%, and other cost items rose 1% year over year.

The operating ratio (operating expenses as a percentage of revenues) in the first quarter of 2025 also remained flat on a year-over-year basis at 60.7%. However, lower fuel prices and a leap year unfavorably impacted the operating ratio by 90 basis points.

UNP’s Segmental Highlights

Bulk (Grain & grain products, Fertilizer, Food & refrigerated, Coal & renewables) freight revenues were $1.84 billion, which increased 1% on a year-over-year basis. However, we had projected the metric to fall 1.2% from the year-ago levels. Segmental revenue carloads improved 2% year over year.

Industrial freight revenues totaled $2.08 billion, down 1% year over year. Segmental revenue carloads declined 1% on a year-over-year basis at $537 million.

Freight revenues in the Premium division were $1.77 billion, up 5% year over year. However, we had expected the metric to decrease 0.6% compared with the year-ago reported figure. Premium revenue carloads improved 13% year over year.

We note that another major player from the Zacks  Transportation - Rail industry, CSX CSX, reported disappointing first-quarter earnings numbers on April 16. (See the Zacks Earnings Calendar to stay ahead of market-making news.)

The company’s performance in the first quarter was disappointing due to declining coal revenues, fuel surcharges and merchandise volume.

Moreover, CSX outpaced the Zacks Consensus Estimate for earnings only once in the last four quarters (missing the mark in the remaining three). The average miss is 3.1%.

UNP’s Liquidity

Union Pacific exited the first quarter of 2025 with cash and cash equivalents of $1.41 billion compared with $925 million in the first quarter of 2024. Debt (due after a year) decreased to $30.6 billion in the March-end quarter from $31.2 billion in the first quarter of 2024.

Currently, Union Pacific carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

UNP’s Outlook

 Volumes are likely to be impacted by a mixed economic backdrop, coal demand fluctuations and challenging year-over-year international intermodal comparisons. Pricing gains are expected to positively affect the operating ratio.

Earnings per share growth is aligned with the company's three-year CAGR target of high-single to low-double digits. Management also anticipates maintaining its industry-leading operating ratio and return on invested capital.

Union Pacific's long-term capital allocation strategy remains unchanged, with a capital plan of $3.4 billion and share repurchases ranging from $4 to $4.5 billion.

Q1 Performances of Other Transportation Companies

United Airlines’ UAL first-quarter 2025 earnings per share (excluding 25 cents from non-recurring items) of 91 cents surpassed the Zacks Consensus Estimate of 75 cents. In the year-ago quarter, the Chicago-based airline reported a loss of 15 cents per share. 

Operating revenues of $13.21 billion fell marginally short of the Zacks Consensus Estimate of $13.22 billion. However, the top line increased 5.4% year over year despite the tariff-induced slowdown in domestic air travel demand. Passenger revenues (which accounted for 89.7% of the top line) rose 4.8% to $11.9 billion. The actual figure was short of our passenger revenue estimate of $12.5 billion. UAL flights transported 40,806 passengers in the first quarter, up 3.8% year over year.

Delta Air Lines DAL reported first-quarter 2025 earnings (excluding 9 cents from non-recurring items) of 46 cents per share, which surpassed the Zacks Consensus Estimate of 40 cents. Earnings increased 2.2% on a year-over-year basis due to low fuel costs.

Revenues in the March-end quarter were $14.04 billion, surpassing the Zacks Consensus Estimate of $13.81 billion and increasing 2.1% on a year-over-year basis. Adjusted operating revenues (excluding third-party refinery sales) rose 3.3% year over year to $13 billion.

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This article originally published on Zacks Investment Research (zacks.com).

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