...Service quality should continue to improve. Union Pacific (UP) reports improving service metrics through the beginning of the year. Reported freight car velocity, which measures the average miles a freight car moves each day, improved about 3% sequentially in the first quarter of 2023 from the fourth quarter of 2022, and has improved further through the beginning of April. We believe increased headcount will continue to support better service this year. Although this larger workforce, along with recent labor agreements, will increase personnel expenses, we expect efficiency gains and improved productivity will modestly improve profitability. Therefore, we forecast UP's operating ratio (operating expenses, including depreciation, as a percent of revenue) will improve slightly to the high-50% area from 60.4% in 2022, and EBITDA margin will improve slightly but remain in the low-50% area, consistent with 50.7% in 2022. Demand will likely remain muted. Although UP's service will improve, we...
