Why Union Pacific Stock Popped Today
Key Points
Efficiency gains are driving Union Pacific's profits higher.
Management is committed to rewarding shareholders with steadily growing dividends.
- 10 stocks we like better than Union Pacific ›
Shares of Union Pacific (NYSE: UNP) rose on Thursday after the railroad operator delivered solid quarterly results.
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Strong operational performance
Despite a volatile macroeconomic backdrop, Union Pacific's operating revenue increased 3% year over year to $6.2 billion in the first quarter.
With its rail network spanning 23 states and linking major U.S. ports and key gateways to Mexico, Union Pacific serves a vital role within the country's transportation system. That gives it pricing power, or the ability to raise prices above the rate of inflation.
These pricing gains, combined with fuel surcharges, helped to drive Union Pacific's freight revenue up by 4% to $5.9 billion.
Better still, Union Pacific is becoming more efficient. Its trains are getting faster, with freight car velocity rising 9% to 235 daily miles per car. They're also spending less time at rest, with average terminal dwell improving by 11% to 19.7 hours.
Importantly, the railroad's fuel consumption rate also improved by 4%, at a time when conflict in the Middle East has driven diesel prices sharply higher.
All told, Union Pacific's adjusted net income climbed 5% to $1.7 billion. The company's adjusted earnings per share, boosted by stock buybacks, jumped 9% to $2.93.
The merger is progressing
Looking ahead, Union Pacific reiterated its goals for 2026, including mid-single-digit earnings-per-share growth driven by continued efficiency gains. Management expects these profits to support steady annual increases in cash dividend payments to shareholders.
Union Pacific also remains on track to merge its primarily central and western U.S. operations with Norfolk Southern's eastern U.S. rail network.
"As we advance through the regulatory process to create America's first transcontinental railroad, we have a solid foundation for another year of industry-leading results," CEO Jim Vena said.
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool recommends Union Pacific. The Motley Fool has a disclosure policy.
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