Union Pacific Corp Q2 2025 Earnings Call Transcript

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

Question: Jonathan Chappell - Evercore Inc - Analyst : Thank you. Good morning, Jim. That's quite a curve ball with the press release and not taking any questions about the thing everyone is going to ask you about. So let me phrase it this way, and you can answer it how you so choose. Everything you just laid out before the mention of the press release is everything you said you're going to do and you're going to join. The momentum is amazing. The OR is best in business, pricing, balance sheet. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 24, 2025 / 12:45PM, UNP.N - Q2 2025 Union Pacific Corp Earnings Call Everything is working the way it's supposed to and you're doing this in a very tough freight environment. So why now to potentially think on a multiyear distraction that could potentially sidetrack the organic momentum that you're already building?

Question: Jonathan Chappell - Evercore Inc - Analyst : I appreciate it. Thanks, Jim.

Question: Brian Ossenbeck - JPMorgan Chase & Co - Analyst : Hey, good morning, Jim morning team. Thanks for taking the question. So if I could just ask more of a philosophical one for you, Jim. We've seen efforts to give shippers options like reciprocal switching over the past quarter. Obviously, just remanded that back to the STB. But what's your view on just conceptually the reciprocal switching, open access, giving shippers more options, maybe in exchange for the news you just announced? And you've also talked about the rail industry hasn't done a great job for intermodal growth in the past, making some tough decisions. I want to see if you had some further comments on that, maybe a direct to shipper offering at some point. So I know that's a lot of theoretical stuff, but I appreciate your thoughts on that, Jim. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 24, 2025 / 12:45PM, UNP.N - Q2 2025 Union Pacific Corp Earnings Call

Question: Brian Ossenbeck - JPMorgan Chase & Co - Analyst : Yeah, I appreciate it, Jim. Good luck.

Question: Brian Ossenbeck - JPMorgan Chase & Co - Analyst : Thanks Jane appreciate it.

Question: Stephanie Moore - Jefferies LLC - Analyst : Hi, good morning. Thank you. Can you hear me?

Question: Stephanie Moore - Jefferies LLC - Analyst : Great. I'm doing very well. Well --

Question: Stephanie Moore - Jefferies LLC - Analyst : You're more than welcome to ask me whatever questions you'd like. Maybe I'll jump away from the topic de jure real quick here. I wanted to talk a little bit about the rail itself. I mean you've made tremendous progress. The network is working about as swell as it has. So as you think about the back half of the year and you talk about really the cost performance as we go from Q2 to 3Q, if you wanted to share any puts and takes about anything that might not continue from the second quarter into the third quarter. At the same time, how we should think about maybe some potential benefits as we look to the back half of the year and ultimately hitting that full year target? Thank you.

Question: Bascome Majors - Susquehanna Financial Group LLLP - Analyst : As you look out long term, UP has been pretty committed to the modification approach to refreshing your locomotive fleet over the last three years. As that agreement, which I believe predated your arrival, Jim, comes to an end here in the next couple of quarters, how do you feel about the fleet today? What are your intentions and desire to continue refreshing it longer term? And does a combination make that a little more complicated than it would have been otherwise? Thank you.

Question: Ken Hoexter - Bofa Merrill Lynch Asset Holdings Inc - Analyst : Hey, good morning, Jim and team, certainly a loud announcement this morning. So I want to ask about the operating potential, right? You're at a 58.1%. Maybe can you talk about where you think you can still take this railroad in terms of operating ratio efficiency? And Jen, you talked about the ability to hit the upper single digit, low double-digit target. I think you were kind of saying specifically to this year, right? I just want to clarify that, where it hadn't been, I don't think, that specific before. And Jim, just can you clarify just using words, right? You mentioned it's in advance. Is there different stages of discussions that -- like we should be taking away with the advanced comment? Thanks.

Question: Ken Hoexter - Bofa Merrill Lynch Asset Holdings Inc - Analyst : Just the advanced comment. I just want to understand, is there a signal there or what it means? I don't know what you're trying to spend with that comment.

Question: Ken Hoexter - Bofa Merrill Lynch Asset Holdings Inc - Analyst : Appreciate it, Jim. Thank you very much.

Question: Daniel Imbro - Stephens Inc - Analyst : Hey, good morning. Thanks for taking the question, Jim. Maybe a different question on regulation here, and to follow up on part of Chris's question earlier. Just with the new administration and maybe lower regulatory backdrop, are we seeing any progress on things like (inaudible) to 0, 1-man crew? I mean you mentioned when it was a five-man crew, four-man crew. I mean, any progress on that push towards automation, or are any closer to a more efficient future with the new administration?

Question: Daniel Imbro - Stephens Inc - Analyst : Great, appreciate the answer.

Question: Jason Seidl - Cowen and Company LLC - Analyst : Yeah, thanks, operator. Good morning. I guess, with your line of questioning or how limited you could be, I could ask about if you guys had up too much money in Bouchard (inaudible) season, but I'm going to try anyway. There's been a lot of talk about opening up some of this watershed traffic or accessing it. So can you talk about sort of the market that's out there for the rail industry in terms of how much business you think is available to access, whether it be through a deal or through railroads working together more closely?

Question: Scott Group - Wolfe Research LLC - Analyst : Hey, thanks. Good morning. I'll just stick to some of the fundamentals for now. Jennifer, any thoughts on second half operating ratio, second half price/mix as you sort of think about the business? And then, Kenny, that's just huge strength in coal, putting aside the contract win, like what's the sense from customers about the sustainability of this? Do we need to just think about -- do we need to start thinking about coal a little bit differently just given everything going up with the power markets?

Question: Richa Harnain - Deutsche Bank AG - Analyst : Good morning. So maybe you can talk a little bit about how you see your intermodal channel partners, the IMCs fitting into the equation of driving more domestic intermodal and enabling more conversions. It seems like you're doing more transloading services through your own subsidiaries. Do you think that's sustainable or you can grow it? Kenny, you talked about the new products you're introducing on the domestic side, seven days a week in various markets. Are your IMC partners able to keep up? And then I know just a bonus one, if you throw me a bone given it's on the core business. Kenny, you also talked about, I think, over 400 projects and you have a line of sight winning those. And maybe you can talk about like customer feedback on turning those on if those conversations are being accelerated by the new tax plan. Anything on the long-term outlook for the revenue growth would be helpful. Thank you.

Question: Brandon Oglenski - Barclays Services Corp - Analyst : Good morning, Jim, and I guess I want to ask one on the historical perspective of the industry just given your career, like how has the interchange process for customers evolved? I mean, we always used to talk about Chicago as being a real pain point and so I guess can you talk to where that is today, some of the challenges that you still see with your shippers, and maybe some of the inherent limitations on dealing with that given today's structure.

Question: Brandon Oglenski - Barclays Services Corp - Analyst : Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 24, 2025 / 12:45PM, UNP.N - Q2 2025 Union Pacific Corp Earnings Call

Question: Walter Spracklin - RBC Capital Markets Inc - Analyst : Good.

Question: Walter Spracklin - RBC Capital Markets Inc - Analyst : Absolutely. So I'm going to put -- if we put aside merger talk, Jim, you and I, we have talked in the past about US-bound traffic making its way up through Canadian ports, and that's been a target for you in terms of repatriating that. I was wondering, have you ever quantified that as a total addressable market as to how much you could repatriate? And if you -- even if we were to go after that, is the port a big bottleneck at all in terms of you getting that volume? Or is it forget that volume, if we get more East-West fluidity, it's really domestic that you're going to focus on, not international intermodal?

Question: Walter Spracklin - RBC Capital Markets Inc - Analyst : Thank you, Jim.

Question: Jordan Alliger - Goldman Sachs Group Inc - Analyst : Just curiosity question. Simultaneous with the discussions you're having with Norfolk Southern, do you actually pre-discuss or engage in like premerger chats with the Surface Transportation Board around this? Thank you.

Question: David Vernon - Sanford C Bernstein & Co LLC - Analyst : Hey guys. And Jim, thanks for disproving the thesis that (inaudible) in this quarter. Kenny, as you're looking at the tariff impacts on some of the grain export risk, I guess it occurred to me that the export side of the equation is going to be a negative. But as you're looking across the business, whether it's metal or some of the more domestic movements, are you seeing any positives as freight roads kind of being redirected or tariffs are incentivizing additional production inside of the US? Can you talk a little bit about how that balances out from an overall impact on the book of business? Thanks.

Question: Ariel Rosa - Credit Suisse - Analyst : Hey, good morning, Jim. Congrats on a nice quarter here. Jim, you talked about evolving to the changing business environment. It's not really M&A specific. But I was hoping you could talk about what constraints you think UP has from kind of a structural network perspective that inhibit its growth. And kind of what prevents you from taking more share off the highway, especially with the service levels as strong as they are today?

Question: Ravi Shanker - Morgan Stanley - Analyst : Great, thanks. Thanks for all the discussion today. Jim, maybe just a follow-up to a previous question. Obviously, you've had many, many, many customer conversations over the years. To what extent have you been effectively asked by your shipper customers to see if you can put together something like a transcon railroad because they want a service like that and they want to take trucks off the road? And to what extent has this been precipitated by customer conversations?