Union Pacific (UNP) Morgan Stanley's 14th Annual Laguna Conference summary

Operational performance and business mix

• Carloads increased by 5% for the quarter, with industrial volumes up 5.2% and broad-based growth across segments.

• Domestic intermodal is the primary growth driver, with a fifth consecutive quarter of record year-over-year performance.

• Bulk volumes declined by 1% due to low natural gas prices impacting coal, but grain demand remains strong.

• Service metrics have recovered, with car velocity in the mid-230s and dwell times under 20 hours, supporting increased business without service degradation.

• Locomotive workforce productivity increased by 4%, and carloads rose by 2% year-over-year.

Financial impacts and pricing environment

• Rising fuel prices, now averaging $5.20–$5.30 per gallon, are creating short-term pressure on operating ratio, with a 120+ basis point impact expected.

• Higher fuel costs highlight rail’s efficiency advantage over trucking, driving some truck-to-rail conversions.

• Intermodal pricing benefits from truck market tightness, with stronger bid seasons expected to impact results more in the back half of 2027.

• Peak season surcharges and opportunistic box acquisitions are being used to capture strong demand.

• Merger costs for the quarter reported at $20 million.

Capacity, technology, and service investments

• Investments since 2019 have enabled handling more business with 24% fewer trains, providing ample excess capacity.

• $1.2 billion invested in intermodal capacity over the past 8–9 years to support growth.

• Technology upgrades include new gate systems, improved switching, and a major system overhaul, boosting productivity by 20%.

• Terminal Command Center and automation initiatives aim to further improve productivity and safety.

• A dynamic operating plan is in development to enable rapid adaptation to business changes and optimize asset utilization.