UNP Q1 Earnings Call: Volumes Grow, Pricing Power Holds Amid Market Uncertainty

Freight transportation company Union Pacific (NYSE: UNP) fell short of the market’s revenue expectations in Q1 CY2025, with sales flat year on year at $6.03 billion. Its non-GAAP profit of $2.70 per share was 1.1% below analysts’ consensus estimates.

Is now the time to buy UNP? Find out in our full research report (it’s free).

StockStory’s Take

Union Pacific’s first quarter performance reflected meaningful operational improvements and volume growth despite missing Wall Street’s revenue and non-GAAP earnings expectations. Management attributed the quarter’s flat top-line result to higher freight volumes and strong core pricing, partially offset by unfavorable business mix and lower fuel surcharge revenue. Executive Vice President Kenny Rocker highlighted that intermodal and bulk segments led volume gains, while CFO Jennifer Hamann noted productivity initiatives and cost management helped maintain margins even as external headwinds persisted.

Looking ahead, Union Pacific’s leadership signaled ongoing caution due to tariff uncertainty, volatile fuel prices, and shifting customer demand patterns. CEO Jim Vena stated, “There’s a lot of things—tariffs, economy, consumer behavior, interest rates—that are up in the air.” Management reiterated commitment to its three-year growth and margin targets but acknowledged the need for agility and scenario planning as conditions evolve. The company expects to adjust hiring, capital allocation, and operational levers based on how these external factors develop through the remainder of the year.

Key Insights from Management’s Remarks

Union Pacific’s management pointed to a mix of operational gains, pricing strength, and external pressures as the main themes of the quarter. Despite flat revenues, leadership emphasized record service and productivity metrics.

• Volume Growth Led by Intermodal: Management cited a 13% increase in premium segment volume, particularly in intermodal shipments linked to West Coast imports, as a key driver, though this mix carried lower average revenue per car.
• Strong Core Pricing Execution: Core pricing reached its highest quarterly level in a decade, supported by improved service reliability and proactive customer engagement, which management believes will be sustainable.
• Business Mix and Fuel Headwinds: A shift toward lower-margin business lines, such as intermodal and coal, along with reduced fuel surcharge revenue, offset gains from higher volumes and pricing, holding margins flat.
• Cost Discipline and Productivity Initiatives: Workforce productivity and asset utilization improved, with management highlighting technology investments—like energy management systems and adaptive planning tools—that enabled operations to scale efficiently with volume.
• Tariff and Trade Policy Uncertainty: Executives noted that ongoing changes in tariffs, especially related to China and Mexico, have injected significant uncertainty into demand forecasting, prompting close coordination with customers and flexible network planning.

Drivers of Future Performance

Management’s outlook for the remainder of the year centers on maintaining operational agility and disciplined pricing, while preparing for potential shifts in trade policy and consumer demand.

• Tariff and Policy Volatility: The company is monitoring evolving trade policies and tariffs, particularly those affecting international intermodal and automotive shipments, as these could materially impact volume and network flows.
• Pricing and Service Reliability: Leadership believes continued pricing discipline, underpinned by service consistency and network investments, will be critical for sustaining margins if volumes become more volatile.
• Cost Flexibility and Technology: Management emphasized its ability to flex costs, adjust workforce levels, and deploy digital tools to maintain operating leverage in both growth and contraction scenarios, noting that hiring and capital spending will be calibrated to demand trends.

Top Analyst Questions

• Chris Wetherbee (Wells Fargo): Asked for clarity on how management frames its earnings and margin outlook amid heightened uncertainty. CEO Jim Vena reiterated commitment to three-year targets but cautioned that “everything is so fluid” and the company is prepared to react quickly to changes.
• Fadi Chamoun (BMO Capital Markets): Inquired about the sustainability and drivers of strong core pricing. CFO Jennifer Hamann pointed to contract repricing opportunities and catch-up from prior inflation, while Kenny Rocker emphasized pricing to service quality.
• Brandon Oglenski (Barclays): Questioned the impact of rising tariffs and potential demand shocks on West Coast intermodal flows. Management detailed frequent customer engagement and highlighted adaptive planning tools to scale resources up or down rapidly.
• Scott Group (Wolfe Research): Probed why robust volume and pricing did not translate into higher margins. Leadership attributed this to negative business mix and fuel headwinds, with expectations that mix could improve in the back half of the year.
• Jonathan Chappell (Evercore ISI): Asked about resource planning for possible intermodal volatility. Operations EVP Eric Gehringer described maintaining a "buffer of resources" and using network technology to adjust train capacity and routing as demand shifts.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will be tracking (1) the trajectory of intermodal and automotive volumes as trade policies and tariffs evolve, (2) the company’s ability to sustain pricing power and margin discipline even as business mix fluctuates, and (3) the operational impact of ongoing technology and productivity initiatives. The company’s response to changes in customer demand and external macroeconomic pressures will remain key signposts for execution.

Union Pacific currently trades at a forward P/E ratio of 18×. At this valuation, is it a buy or sell post earnings? The answer lies in our free research report.

The Best Stocks for High-Quality Investors

Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.

While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 176% over the last five years.

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.