OMAHA, Neb. – Union Pacific’s profits rose in the fourth quarter as volume increased 5% and operating costs fell.
“Our strong fourth quarter results represent a great capstone to a very successful year for Union Pacific,” CEO Jim Vena said in a statement. “The team has fully embraced our strategy to lead the industry in safety, service, and operational excellence. That commitment has produced industry leading financial results in 2024, punctuated by our strong finish to the year. We will carry this momentum into 2025 as we seek to unlock the full potential of the UP franchise.”
For the quarter, UP’s operating income increased 5%, to $2.5 billion, as revenue declined 1%, to $6.1 billion. Earnings per share rose 7%, to $2.91. For the year, operating income was up 7%, to $9.7 billion, as revenue grew 1%, to $24.3 billion.
The railroad’s fourth quarter operating ratio improved 2.2 points, to 58.7%, as operating expenses declined 4%. For the full year, the operating ratio improved 2.4 points, to 59.9%. UP’s return on invested capital – which measures how efficiently a company uses its capital to generate profits – was up 0.3 points, to 15.8%.
Traffic volume was up 5% overall in the fourth quarter, driven by gains in intermodal, grain, and chemicals business. For the year, volume was up 3%.
UP’s outlook for this year is mixed due to uncertainty surrounding the economy and potential tariffs on imports from Canada, Mexico, and China, the biggest trading partners of the U.S. “I’m hoping that it’s a negotiating position by the president,” Vena said of the proposed tariffs that could be implemented as soon as Feb. 1.
On the flip side, Trump’s proposed corporate tax cuts and easing of regulations could be a plus for the railroad, Vena says.
UP expects year-over-year volume declines in coal, metals, and international intermodal volume, says Kenny Rocker, executive vice president of marketing and sales. Automotive traffic is expected to be flat for the year, while UP projects that its grain, chemicals, plastics, and domestic intermodal business will see growth.
Rocker says it’s unclear how long international intermodal traffic will remain strong through West Coast ports. Importers shifted away from the East Coast last year as a hedge against a port strike. Meanwhile, some importers ordered goods earlier than usual to avoid potential tariffs, which also has fed the West Coast surge.
Overall, UP still expects its traffic volume to grow faster than the underlying economy. “The credo here for the management team is we’re going to have volume outpace the markets and we expect the revenue to outpace volume,” Rocker says.
UP’s coal traffic slumped 21% in 2024 due to a combination of low natural gas prices and high coal stockpiles at power plants. The downward trend will continue this year, but a contract win should help offset the volume loss, Rocker says. UP this year will begin handling Powder River Basin coal from Wyoming to the Sam Seymour Power Plant in La Grange, Texas.
UP’s key operational and service metrics mostly improved for the quarter.
Freight car velocity increased 1%, to 219 miles per day, thanks to lower terminal dwell. The manifest service performance index improved 5 points to 96%, but the intermodal service performance index dropped 7 points to 89% due to a 26% surge in international volume. The intermodal on-time performance improved as the quarter went on, however, and stood at 97% in December.
“Historically, fast surges in volume, such as those we witnessed in 2024, significantly disrupt rail operations,” says Eric Gehringer, executive vice president of operations. “However, the team bucked that trend and was able to improve our service product while also driving growth and network efficiency.”
It’s proof, Gehringer says, that UP’s focus on operational excellence is working.
UP posted record low terminal dwell in 2024, as well as record high workforce productivity. The fourth quarter, meanwhile, was UP’s sixth in a row of record average train lengths.
The railroad said its derailment and personal injury rates improved significantly for the year, but did not provide specifics.
UP’s capital program will total $3.4 billion again this year, including $1.9 billion for maintenance projects, $600 million for capacity improvements, $500 million for locomotive modernizations and new freight cars, and $400 million for technology investments.
UP plans share repurchases of between $4 billion and $4.5 billion this year.
Note: Updated at 12:07 p.m. Central with details from UP’s earnings call.
