Union Pacific 4Q Profit Rises as Fuel Expenses Drop — Update

By Owen Tucker-Smith

Union Pacific is benefiting from improvements in fuel efficiency and lower diesel prices.

The freight railroad said Thursday that its net income expanded 7% in the fourth quarter, reaching $1.76 billion, or $2.91 a share, compared with $1.65 billion, or $2.71 a share, a year earlier, as tighter fuel spending and gains in premium freight volumes offset almost flat revenue.

Analysts surveyed by FactSet expected earnings of $2.80 a share.

The Omaha, Neb.-based company, a bellwether firm for the U.S. economy, posted revenue of $6.12 billion, down from $6.16 billion a year ago. Analysts expected $6.15 billion. Revenue was driven lower by a drop in fuel surcharge revenue and an unfavorable business mix, the company said, even while volume and core pricing picked up.

Union Pacific's operating expenses declined 4%, including a 23% drop in fuel spending. The railroad said its fuel efficiency, based on consumption per gross ton miles, improved 1% compared to the fourth quarter of 2023. Diesel prices across the U.S. were also broadly lower during the fourth compared to the year-ago period, according to the Energy Information Administration.

Freight volume was up 5% year-over-year in the December quarter, boosted by a 16% gain in intermodal truck-rail shipments.

Intermodal traffic for all U.S. railroads rose more than 9% year-over-year in 2024, according to figures from the Association of American Railroads. With its network focused on the Western U.S., Union Pacific got a boost from growing container volumes flowing into West Coast ports.

The company said it expects volume in 2025 to be impacted by a mixed economic backdrop, but didn't provide a specific revenue estimate. The railroad expects weak coal demand to continue driving down revenue, but noted that its uptick in grain volume will likely continue.

Coal demand struggled, with freight revenue dropping 29%, but grain - a core part of the railroad's business - is expected to propel growth in 2025. Freight revenue from grain and grain products was up 8% in the fourth quarter in a trend that's expected to continue.

Rising prices for natural gas could be another win for the company and could increase demand for coal transportation, as utilities switch back to cheaper alternatives.

Union Pacific executives added on an earnings call Thursday morning that changes to economic policy, including possible tariffs and more lax regulation, may also impact the company's finances throughout the new year.

Chief Executive Jim Vena hopes tariffs are only a negotiating chip for President Donald Trump, saying that he doesn't think consumers in the U.S. would love to have increases in prices. But Trump-era changes could also help Union Pacific, particularly if more lax regulators can fast-track a plethora of waivers the company has submitted over the years, which have been held up in the regulatory process.

Shares were recently up 3.9% to $245 in premarket trading, but are down about 2.4% in the past 52 weeks.

Paul Page contributed to this article.

Write to Owen Tucker-Smith at owen.tucker-smith@wsj.com