Union Pacific misses Q4 targets on volume decline
Railroad maintains mid-single digit growth guidance despite 4% freight drop, posts record operational metrics
Union Pacific Corporation missed fourth-quarter earnings and revenue expectations as freight volumes declined, though the railroad maintained its growth outlook and delivered record operational performance despite challenging market conditions.
The Omaha-based railroad reported adjusted earnings per share of $2.86 for the fourth quarter of 2025, falling short of the $2.98 consensus estimate, while revenue reached $6.09 billion compared to analysts' expectations of $6.25 billion. The shortfalls came as overall freight volumes declined 4%, with international intermodal segments facing particularly difficult year-over-year comparisons.
Despite the headline miss, Union Pacific's board maintained guidance for mid-single digit earnings per share growth in 2026, reaffirming confidence in the company's ability to execute through softer economic conditions. The company also sustained its three-year target of high-single to low-double-digit compound annual growth rate through 2027, according to the company's earnings announcement.
"We achieved our best-ever full year for safety, freight car velocity, locomotive productivity, terminal dwell, train length, workforce productivity, and fuel consumption rate," the company stated in its earnings release, highlighting operational achievements that have become a focal point for investors under chief executive Jim Vena's leadership.
The railroad's adjusted operating ratio improved 60 basis points to 59.3%, demonstrating that efficiency gains are offsetting volume pressures. Freight car velocity increased 8% for the full year to 225 daily miles per car, while average terminal dwell improved 9% in the fourth quarter to 19.8 hours. Train length grew 3% to 9,729 feet, and workforce productivity rose 3%.
Full-year operating revenue reached $24.5 billion, up 1% year-over-year, driven by core pricing gains that helped mitigate volume declines. Freight revenue excluding fuel surcharges increased 3% for the year.
Union Pacific outlined a $3.3 billion capital plan for 2026, focused on maintaining infrastructure while continuing to invest in technology and efficiency initiatives. The company also declared a quarterly dividend of $1.38 per share, extending its streak of 126 consecutive years of dividend payments and 19 years of annual increases.
Analysts have offered mixed but generally positive assessments of the railroad's positioning. RBC Capital lowered its price target to $280 from $287 while maintaining an "Outperform" rating, while Bank of America raised its target to $266 from $260 with a "Buy" rating. Barclays increased its target to $285 from $270, keeping an "Overweight" rating. The consensus rating remains "Moderate Buy" with an average target price of $263.21, according to market data.
The volume challenges reflect broader industry headwinds, including softer industrial demand and difficult comparisons to the pandemic-driven freight boom of 2024. Management had previously indicated that fourth-quarter volumes were running down 6%, with international intermodal facing the steepest declines due to shifts in global trade patterns.
Union Pacific shares, which closed at $230.89 on January 26, face additional uncertainty around regulatory approval of its proposed merger application with Wabtec, a potential catalyst that has drawn attention from analysts including Wolfe Research, which recently upgraded the equipment supplier citing "potential upside for Wabtec from Union Pacific's merger application."
The railroad's return on invested capital, a key efficiency metric, stood at 15.4% on a trailing twelve-month basis, and management signaled expectations for an industry-leading operating ratio and ROIC in 2026. With a market capitalization of approximately $136 billion and a price-to-earnings ratio of 19.6, investors will be watching whether Union Pacific can deliver on its growth guidance while navigating persistent volume challenges and potential regulatory hurdles.