Union Pacific Earnings Were Solid. Investors Care About Something Else.

A Union Pacific train. Coming into Thursday trading, the stock was down 1% this year. (Dreamstime)

Key Points

• Union Pacific reported third-quarter adjusted earnings per share of $3.08, exceeding analysts expectations.
• Operating profit margins for Union Pacific improved by more than two percentage points year over year, reaching approximately 42%.
• Investors are currently focused on Union Pacific’s proposed merger with Norfolk Southern, which faces significant regulatory challenges.

Railroad operator Union Pacific reported solid third-quarter earnings, despite slow freight markets. The stock didn’t react much because investors are focused on mergers now.

Thursday morning, Union Pacific announced adjusted earnings per share of $3.08 from sales of $6.2 billion. Wall Street was looking for EPS and sales of $2.99 and $6.2 billion, respectively.

A year ago, in the third quarter of 2024, Union Pacific reported EPS of $2.75 from sales of $6.1 billion. Operating profit margins improved more than two percentage points year over year to about 42%.

“Our third quarter results serve as a proof point that we are successfully executing on our strategy,” said CEO Jim Vena.

Union Pacific stock lost 2.3% on Thursday, closing at $220.04, while the S&P 500 and Dow Jones Industrial Average gained about 0.6% and 0.3%, respectively.

As Vena noted, investors are more focused on the railroad’s planned merger with Norfolk Southern . “We have a historic opportunity with the Norfolk Southern to create America’s first transcontinental railroad,” he said. “As we work towards regulatory approval, our team is focused and driving continued improvements in our pursuit of what’s possible.”

Norfolk and Union Pacific announced merger plans in July, but the deal will face many regulatory hurdles. Major M&A between U.S. railroads hasn’t happened in decades, and the industry is already well consolidated. Union Pacific management isn’t likely to speculate on the odds of a deal being done, leaving investors to wait to see how things develop.

Since Semafor reported news of a potential merger, Norfolk shares have added 11%. Shares of CSX, a railroad investors believe could also be acquired, are up 8%. Shares of Union Pacific, Canadian National Railway, and Canadian Pacific Kansas City were down an average of 5%. Those are the larger railroads and are likely seen by investors as the potential acquirers.

Coming into Thursday trading, Union Pacific stock was down 1% this year, leaving it far behind the market. Business is a little slow.

Freight volumes were down slightly year over year in the quarter. Bulk commodity and industrial shipments grew, but traffic for consumer goods and autos dropped.

Management’s forecasts for the fourth quarter mirrored the third-quarter shipping numbers.

Write to Al Root at allen.root@dowjones.com