Union Pacific Corp Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Christian Wetherbee - Wells Fargo - Analyst : Hey, hey. Thanks. Good morning, guys. Good morning. I guess I wanted to talk a little bit about 2025 guidance. So, obviously uncertainty is building here with concerns about maybe some slowing activity, particularly on the West Coast. You guys have talked about sort of growth this year consistent with the long term targets, and I think that can kind of take a couple of different meanings. So I was kind of curious if you wanted to maybe put a little bit of a finer point, kind of think about what the potential outcomes could be either from an earnings perspective, maybe from an operating ratio perspective, just wanted to see if you can put some framework around what you think '25 might look like just given the uncertainty that's out there.

Question: Christian Wetherbee - Wells Fargo - Analyst : Thank you very much. I appreciate it.

Question: Thomas Wadewitz - UBS - Analyst : Yeah, good morning. I guess this is a question along the same theme which you'll probably get even more after mine, but, when we think about your framework for this year and kind of volumes are strong in April, there are a number of segments that might be pre-shipping or fall off. So, I guess if you say in that, kind of three-year guide and call it high single digits, earnings growth at the low end. Is there like a revenue growth or a volume growth assumption that you say. Here, we kind of need to be in this range in order to achieve that and I guess, I don't know if that's the low single digits revenue growth and then I guess it's just from a year over year perspective if you're flat in earnings in one queue but you do, for your high single digits, what's the lever that that accelerates it, just easier comps is it kind of volume accelerates just. I guess a couple more things of how we understand the frame. Thank you.

Question: Thomas Wadewitz - UBS - Analyst : I guess any thoughts on like threshold revenue growth or volume to get there or not?

Question: Thomas Wadewitz - UBS - Analyst : Thanks for the time.

Question: Fadi Chamoun - BMO Capital Markets - Analyst : Yeah, good morning, Jim. So, a quick question on the pricing. You mentioned the strongest in ten years for a Q1. How much of that is reflecting maybe the lag impact from the inflation we saw in the last couple of years and how much is driven by the better service performance of the network in the last year? If you can give some color about kind of what, what's under, underlying the strong pricing and how sustainable that is. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 24, 2025 / 12:45PM, UNP.N - Q1 2025 Union Pacific Corp Earnings Call

Question: Brandon Oglenski - Barclays Capital - Analyst : Hi, good morning. Good morning. Thanks for taking the question. Kenny, I know everything's volatile right now, but obviously, we have pretty sizable tariffs on Chinese goods here. I mean, I think our treasury secretary is calling it a de facto embargo on trade with China, and we can see that there are going to be some higher blank sailings into like LA Long Beach, which has been, pretty big source of volume for you guys. So I guess maybe a two-part question. Have you heard from your international customers or any of your customers about plans for dealing with these very large tariffs? And then maybe just quickly for Eric, like how would you deal with potentially a big air pocket and demand on certain parts of your network even if you're seeing growth, domestically? Thank you.

Question: Scott Group - Wolfe Research - Analyst : Hey, thanks. Good morning, guys. So, if I take a step back and we have the best pricing in 10 years and volumes up seven and headcounts down three, it, I would have thought it could have been like the perfect storm of like record kind of margin improvement. When you just think about those three things and margins are flat, is this just mix and fuel? And so, what does this look like going forward, maybe at the volume slows, but maybe now the mix turns positive. Hopefully, the fuel headwind isn't the same magnitude. Should we start to see a lot more margin improvement just given this price, as we get through maybe some of this mixed headwind?

Question: Ken Hoexter - Bank of America Securities - Analyst : Great, good morning. So Jim, maybe just taking that to another step, and I know you don't give specific guidance, but if I think about maybe just historical averages, right, so first quarter to second quarter, maybe you could talk about what kind of level improvement you've historically seen. I think it's been about 100 basis points. So I just want to understand just to get to the EPS target that you're talking about, do we have to see outsized seasonal performance given I don't know whether it's the leap day and fuel impact you were talking about? Maybe I'll start with that thanks.

Question: Ken Hoexter - Bank of America Securities - Analyst : Wonderful. And Jim, you mentioned your team lost bad. Was that the Oilers, Canadians, or are you really an Ottawa fan?

Question: Ken Hoexter - Bank of America Securities - Analyst : Sorry to divert. Thank you, guys.

Question: Brian P. Ossenbeck - J.P. Morgan - Analyst : Hey, good morning, thanks. I'll get us back on track for something much more boring than this question, but yeah, I don't know if you appreciate it. Let me ask it first, but, so maybe for Kenny, just the, I know there's a lot of volatility with policies, but it does seem like there will be something on the section 301 related to China shipbuilding and now they're talking about removing the harbor maintenance tax benefit from the Canadian ports. So, I wanted to see what your initial thoughts are on that since we've been through two iterations of that with the [US TR]. And then you know the past trade war, we saw a big impact in general for the US export grain, particularly soy beans. So wanted to see if that's something that we should also be considering here. Thanks.

Question: Brian P. Ossenbeck - J.P. Morgan - Analyst : Thank you, Kenny.

Question: Jonathan Chappell - Evercore ISI - Analyst : Good morning, Jim. Eric, question for you, covered it a little bit. But I don't think we know exactly what the outcome is going to be, but I think with the blank sailings and, some of the other comments around exports leaving China and what's going to come to the west coast. Kenny already mentioned international intermodal probably has some challenges in the back half here, but domestic seems to be set up pretty well. So how do you kind of manage resources for that volatility kind of within the intermodal segment? Do you keep a level of resiliency in case things are kind of short-lived and kind of just focus on service and making sure you're prepared for the upturn, or do you have to become a little bit more, I guess drastic, with some of the resource decisions that you make in the short term?

Question: Joseph Hafling - Jefferies - Analyst : Hi, good morning, everyone. This is Joe Hafling on for Stephanie. Eric, thanks for walking through that. That was very helpful, and I think helped, answer a lot of those questions. I guess I maybe wanted to talk about something a little bit different. Under the surface, all the productivity initiatives you guys have been embarking on, if we think about 2025, what major projects do you guys have kind of under your barrel that you're working on, that we should be looking forward to and maybe just an obligatory how we should think about, headcount throughout the year. Thanks.

Question: Joseph Hafling - Jefferies - Analyst : It was all very thoughtful. Thank You.

Question: Andre Kelleners - Goldman Sachs - Analyst : Morning everyone, thanks for taking the time today. This is Andre on for Jordan. My question is somewhat conceptual trying to frame the downside risk to freight markets that might be left out there in the respect that most of transportation has already been in a freight recession for three years now. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 24, 2025 / 12:45PM, UNP.N - Q1 2025 Union Pacific Corp Earnings Call You know how much additional absolute downside risk is there left to volumes or yields if in a worst case we fall into a consumer-led GDP recession? Would a downturn be less pronounced in freight versus historical GDP slowdowns given the already extended slowdown in freight that occurred post COVID, or would that be fair to say, for some of your non-consumer facing businesses?

Question: Andre Kelleners - Goldman Sachs - Analyst : Thanks. Appreciate the thoughts.

Question: Daniel Imbro - Stephens Inc - Analyst : Hey, good morning, guys. Thanks for taking the question. Kenny, I want to follow up on the intermodal volume and kind of revenue per carload outlook. I think you mentioned there's some international headwinds coming, but the potential for more domestic strength from truckload conversions. I guess how did those domestic conversions trend through the first quarter as the truck market began to soften? And then related to that, I guess with the favorable mix of more domestic versus international, but maybe a softer truck pricing environment, how are you expecting to see intermodal revenue per car load through the back half of the year just as the way this puts the ticks? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 24, 2025 / 12:45PM, UNP.N - Q1 2025 Union Pacific Corp Earnings Call

Question: Ariel Rosa - Citi - Analyst : Yeah, hey, good morning. So I just wanted to ask a clarifying question when you talk about EPS growth consistent with attaining the three-year CAGR on EPS, just help me understand that is not specifically a target for 2025 to be up high single digits to low double digits. Just wanted to clarify that point. And then, we've seen some strength in coal in the second quarter to date. Just wanted to help understand what's underlying that strength and the extent to which you think it's sustainable. Thanks.

Question: David Vernon - Bernstein Research - Analyst : Hey, good morning. Thanks for putting me in here. I wanted to ask maybe, Kenny or Jennifer, when we're talking about the best pricing we've had in about ten years, can you help us sort of understand kind of how much it has improved, kind of either sequentially or where growth to where we were sort of last year, what specifically has changed to drive it? Are we starting to see the benefits of a better service product like or is this just, you guys are being more effective on capturing price in in coal, for example, and then what are you thinking about, the ability to sustain that that best level of pricing in ten years as we go through the rest of this year. Thank you.

Question: David Vernon - Bernstein Research - Analyst : All right, thanks for that. And then maybe if I could just tack one more on here. Have you guys seen any sort of change in cross-border Mexico volumes, either Laredo or Eagle Pass as we've been dealing with some of these, the tariff position. I'm just wondering if there's been any noticeable, sort of shift in that north-south volume.

Question: Jeff Kaufman - Vertical Research Partners. - Analyst : Thank you and good morning. Thanks for squeezing me in. Jim, I like your opening comment about how if you just looked from 10,000 ft, revenues were flat, margins were flat, outlooks the same, no changes, the reality was anything but. I'm just kind of curious if we look at your forward outlook today for, whether it's groups or pricing, as you were talking about core pricing, things like that. What's different today than it was, say, three months ago when you gave us guidance, that's kind of been a legitimate surprise.

Question: Jeff Kaufman - Vertical Research Partners. - Analyst : If I take out the intermodal uncertainty part of it or the international trade certainty, and you just look more at the bulk or industrial groups, what was the legitimate surprise there, positive or negative?

Question: Jeff Kaufman - Vertical Research Partners. - Analyst : Okay, thank you.

Question: Oliver Holmes - Redburn Atlantic. - Analyst : Hi, good morning. Thanks for having me on. It's just a quick one. Is there a scenario, perhaps maybe you're already seeing it, where Asia ex China and Mexico pick up share of the trade war with China continues, in essence, reducing the impact of Chinese tariffs? Maybe just a follow up on that. Is this something you saw during 2018, 2019 when tariffs were levied on China. Thanks.

Question: Jason H. Seidl - TD Cowen - Analyst : Morning, and Jim, I feel your pain on being down to nothing here. Jennifer, I think the question goes to you. You guys did a pretty good job of managing sort of salaries, wages and benefits per employee in one queue, wondering how we should think about that line item going forward. And then just to clarify, I believe we talked about that $46 million gain in last year's 2Q. Was that in other income?

Question: Jason H. Seidl - TD Cowen - Analyst : Perfect. Thank you very much. I appreciate that

Question: Jairam Nathan - Daiwa Capital Markets - Analyst : Hi, thanks for taking my question. Just, on, we talked a lot about what you can do on the cost side and stuff, but I just wanted to understand on the balance sheet in terms of share repurchases, if things, get long drawn or you see bigger and bigger impact, how should we think of your capital return plan between share repurchase conserving cash?

Question: Jairam Nathan - Daiwa Capital Markets - Analyst : Thank you. That's all right.