UNP · Q1 2026 Earnings

Cautious

Union Pacific Corporation

Reported April 23, 2026

30-second summary

30-second take: Revenue grew 3% YoY to $6.22B with adjusted operating ratio of 59.9% — an 80bps improvement vs. Q1 FY2025's 60.7%. Bulk (+10%) and industrial (+5%) carried the print against premium -5% and intermodal -6%, with pricing language explicitly restored ("pricing dollars in excess of inflation dollars"). The buried story is fuel: April is running over $4/gal versus the January FY assumption of $2.35/gal, and Jennifer flagged Q2 as the most pressured quarter without revising the full-year fuel assumption — disclosed alongside a reaffirmed (not raised) mid-single-digit FY EPS guide and a quietly withdrawn $3.3B capex plan and 4%+ rail inflation marker.

Headline numbers

EPS

Q1 FY2026

$2.93

Revenue

Q1 FY2026

$6.22B

+3.0% YoY

Free cash flow

Q1 FY2026

$0.63B

Operating margin

Q1 FY2026

39.5%

Key financials

Q1 FY2026

Metric	Q1 FY2026	YoY	Q4 FY2025	QoQ
Revenue	$6.22B	+3.0%	$6.08B	+2.2%
EPS	$2.93	—	$2.86	+2.4%
Operating margin	39.5%	—	39.5%	+0bps
Free cash flow	$0.63B	—	—	—

Guidance

FY2026 earnings and operating ratio guidance reaffirmed at mid-single digit EPS growth with industry-leading margins; diesel fuel costs revised sharply upward to $4+/gal (vs. prior $2.35 estimate), offsetting pricing power narrative.

Guidance is issued for the full year only, refreshed each quarter. Prior and new below are the same FY updated this quarter.

New guidance

Metric	Period	Guide	YoY
Diesel Fuel Estimate	FY2026	likely to average over $4 per gallon for 2026	—

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Capital Plan	FY2026	$3.3 billion	Withdrawn — no replacement	—	Withdrawn
Rail Inflation Expectation	FY2026	slightly over 4%	Withdrawn — no replacement	—	Withdrawn

Reaffirmed unchanged this quarter: EPS Growth (mid-single digit (per actuals Q1: $2.87 GAAP); consistent with high-single to low-double digit 3-year CAGR through 2027), Operating Ratio (industry-leading; improvement expected), Compensation per Employee Growth (4% to 5% increase expected)

Segment KPIs

Q1 FY2026

Segment	Q1 FY2026	YoY
Freight Revenue - Bulk	$2.026B	+10.0%
Freight Revenue - Industrial	$2.191B	+5.0%
Freight Revenue - Premium	$1.676B	-5.0%
Freight Revenue - Intermodal	$1.116B	-6.0%
Grain & Grain Products	$1.057B	+11.0%
Coal & Renewables	$0.486B	+17.0%

Other KPIs

Q1 FY2026

Segment	Q1 FY2026
Freight Car Velocity	235 daily miles per car
Average Terminal Dwell	19.7 hours
Locomotive Productivity	144 GTMs per horsepower day
Fuel Consumption Rate	1.064 gallons per thousand GTMs
Workforce Productivity	1,163 car miles per employee
Operating Ratio (adjusted)	59.9%
Total Carloads	2,083 thousand
Gross Ton-Miles	220,582 million

Management tone

Narrative arc: Q2 commercial aggression and merger setup → Q3 operational records with mild volume hedge → Q4 explicit step-down and pricing-lever abandonment → Q1 FY2026 pricing restored, fuel re-emerges as the new variable.

The pricing narrative reverted within a single quarter. In Q4 Jennifer told analysts directly that "price may not be a driver of our improving margins in 2026" — the cleanest tone reversal in the four-quarter sequence. This quarter the prepared frame is back to "Core pricing combined with business mix to drive 325 basis points to freight revenue improvement…quarterly pricing dollars exceeded inflation dollars." The lever management publicly set aside three months ago is once again the explicit margin-defense story. This is not a coincidence — it is the way to reconcile a reaffirmed mid-single-digit EPS guide with a Q2 fuel headwind layered on top of the January framework.

The fuel narrative replaced the volume narrative as the central macro variable. Through Q2-Q3 the tension was volume; in Q4 it was pricing-and-volume; this quarter it is fuel: "our original diesel fuel estimate of $2.35 per gallon established in January is now much harder to predict, as we have seen quite a bit of volatility recently…although fuel prices seem to be coming down for the month of April, we will likely average over $4 per gallon." The reference is to April spot pricing, not a revised full-year assumption. The honest admission of lost forecasting confidence is the most candid disclosure in the print and the cleanest tell that Q2 will be the most pressured quarter of the year.

The operational excellence framing escalated from "raising the bar" to "moat." Three quarters ago Eric described productivity gains as routine execution; this quarter Jim opened with "we showed who we are executing on new opportunities and raising the bar on what's possible for ourselves and the industry" — positioning operational records against UNP's own 2025 best months, not against peers or prior cycles. Combined with the latent-capacity disclosure in Q&A (24% fewer trains than 2019 at higher volumes, 100+ parked locomotives), management is increasingly framing the standalone operating story as the bull case independent of the NS merger.

The merger framing held the "when, not if" cadence from Q3-Q4 but slipped on timeline. STB approval is now expected in Q2 FY2027 rather than "first-half 2027 / August 2024 [as hoped]." Jim's Q&A response that he is "more convicted than ever" reads as the standard CEO line on a process slip rather than fresh signal — but the 3-year CAGR target through 2027 is now mathematically tighter because the merger will close, at the earliest, with one or two quarters left in the CAGR window.

Recurring themes management leaned on this quarter:

Record first quarter financial and operational performancePricing power offsetting volume declines and inflationOperational excellence and productivity gains driving competitive advantageNetwork efficiency and service reliability as customer trust buildersDisciplined workforce management enabling volume variabilityBusiness development wins in growth sectors (LNG, data centers, renewable fuels)

Risks management surfaced:

Competitive and global environment pressures in select agricultural marketsLower West Coast imports and customer shifts impacting international intermodal volumesSofter vehicle sales pressuring automotive segmentSoft housing environment affecting industrial productionFuel price volatility making forecasting difficult

Q&A highlights

Scott Group · Wolf Research

Does the delay in the merger approval timeline give Jim more or less confidence in the ability to get the merger approved?

Jim expressed that while disappointed by the timeline delay, he is more convicted than ever in the merger's fundamentals. The delay does not diminish confidence; rather, the detailed merger application and expert analysis strengthen the case. Jim emphasized that the fundamental benefits (service improvements, cost reductions, job guarantees) remain compelling regardless of timing.

Merger approval now expected in second quarter 2027 (not August 2024 as hoped)Merged railroad will be seamless with minimal customer overlap (handful out of thousands)Job guarantees for all unionized employees are ironcladCost savings and service improvements are more clearly demonstrated in revised application

Chris Weatherby · Wells Fargo

Given fuel headwinds in Q2 and impact on operating ratio, what incremental productivity opportunities are offsetting these headwinds to maintain full-year OR improvement guidance?

Jennifer and team confirmed full-year OR improvement guidance remains intact despite Q2 fuel headwind (fuel at $4+/gallon). Offsets include business development wins, consistent pricing discipline for service value, and ongoing operational efficiency improvements. The team has line of sight to achieving targets.

Fuel price ~$4+ per gallon in April (headwind to Q2 margins specifically)Full-year operating ratio improvement guidance reaffirmedQ2 expected to be most pressured by fuel; rest of year feels betterProductivity and pricing discipline offsetting fuel inflation

Jonathan Chappell · Evercore

What is Union Pacific's spare/latent capacity, and how much volume growth can the current system handle without incremental capital or resource additions?

Eric detailed multiple sources of latent capacity: 3% train length improvement (best quarter ever), 24% fewer trains running vs. 2019 despite higher volumes, $500-700M annual capacity investment, and terminal efficiencies (faster dwell, fewer touches). System can absorb significant volume growth without major incremental costs. Management projects ability to add 10%+ business volume without proportional capital increases.

Train length improved 3% in Q1 (best quarter ever)Operating 24% fewer trains than 2019 while moving higher volumes24% fewer trains = significant latent mainline capacityInvested $500-700M annually in capacity projects (sidings, terminals)

Jason Seidel · TD Cowan

How does Union Pacific's business development and new project growth compare to peers, and what guidance can you provide on forward car loading growth?

Kenny declined to provide forward guidance but expressed bullish outlook. Closed ~20 new construction projects in Q1, strong pipeline for Q2, most projects are on carload side. Focus on adding customers at origin and destination points. No specific volume guidance provided, but management tone was optimistic about business development pipeline.

~20 new construction projects closed in Q1Strong pipeline of construction projects for Q2Most new projects are carload-focused (not intermodal)Focus on adding customers at origin and destination

Ken Hexter · Bank of America

What concessions is Union Pacific willing to make on the merger, and does the stock's discount pricing imply market expectations of significant deal concessions?

Jim emphasized that concessions are unlikely to be material given minimal customer overlap (handful out of thousands). Merger is end-to-end with small overlap piece. Willing to discuss with regulators and competitors but not prepared to give major concessions that merely open the railroad without competitive justification. Stock price reflects market, not fundamentals.

Minimal customer overlap between UNP and NS (handful out of thousands of customers)End-to-end merger structure with small overlap pieceWilling to discuss but unlikely to offer significant concessionsCompetitors (CSX, BNSF/Berkshire) remain strong competitors regardless

Answers to last quarter's watch list

Whether Q1 FY2026 adjusted OR returns sub-60% — Yes. Adjusted OR printed 59.9%, 80bps better YoY vs. Q1 FY2025's 60.7%. The qualitative "expect improvement vs. 2025" FY guide is intact at the Q1 mark. Status: Resolved positively

Pricing language in Q1 FY2026 commentary — Reverted. Prepared remarks explicitly frame "core pricing combined with business mix" as drivers of the 325bps freight revenue improvement and re-deploy the "pricing dollars in excess of inflation dollars" formulation that was conspicuously absent in Q4. The Q4 abandonment of pricing as a margin lever did not harden — it reversed. Status: Resolved positively

Any further STB resubmission requests or process delays — Timeline slipped from "first-half 2027" to "Q2 FY2027" per Jim's Q&A, but no second incremental information request was disclosed. The slip is modest but consequential because it tightens the math on the through-2027 EPS CAGR. Status: Continue monitoring

Whether the buyback resumes during FY2026 — Not disclosed this quarter; cash flow statement shows zero repurchases in Q1 FY2026 vs. $1.7B in Q1 FY2025. Combined with the withdrawn $3.3B capex plan, the cash-preservation posture from Q4 appears unchanged. Status: Continue monitoring

2027 EPS commentary in Q1/Q2 calls — Management reaffirmed the high-single to low-double-digit 3-year CAGR through 2027 explicitly and tied the FY2026 mid-single-digit guide to it as "consistent with attaining" the CAGR. No softening of the 2027 framing. But the math remains the same: if FY2026 lands mid-single-digit, FY2027 has to come in within the upper half of the CAGR range to make the framework work. Status: Continue monitoring

What to watch into next quarter

Q2 FY2026 adjusted OR with full diesel headwind absorbed — Q1 printed 59.9% on average fuel of $2.69/gal. Q2 is management's stated "most pressured" quarter on April spot prices above $4/gal. An adjusted OR above 60% in Q2 would not invalidate the FY guide but would force the back half to do meaningful catch-up; a sub-60% Q2 against that fuel backdrop would be the strongest possible validation of the productivity/pricing offset thesis.

Whether the $3.3B FY2026 capex plan reappears, gets re-baselined, or stays withdrawn — silent withdrawal of a quantitative anchor from one quarter to the next is the kind of disclosure change that matters more than the number itself. If capex stays out of disclosure for a second consecutive quarter, it implies an active reconsideration of the FY2026 spending shape.

Coal & renewables deceleration — segment grew +17% in Q1 FY2026 after +23% in Q4 and +16% in Q3. Tougher YoY comps build through FY2026; watch whether the segment decelerates toward zero or holds positive on the four-year coal optimism Jim flagged.

STB process markers between now and Q2 FY2027 expected approval — any second information request, hearing schedule slip, or competitor intervention would push approval beyond the 3-year CAGR window and force a separation of the standalone EPS framework from the merger-inclusive one.

Buyback resumption or formal pause confirmation — six months into the cash-preservation posture, the company should either resume repurchases or formally articulate the pause as policy through merger close. Continued silence is the worst outcome for capital allocation transparency.

Sources

UNP Q1 FY2026 earnings press release (Form 8-K Ex. 99.1), filed April 23, 2026 — https://www.sec.gov/Archives/edgar/data/100885/000010088526000154/a2026-04x238xkex991earning.htm
UNP Q1 FY2026 earnings conference call transcript, April 23, 2026.

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