UNP: Record Q3 results paired 15% adjusted EPS growth with 110 bps of core OR improvement

TD Cowen kept a Buy rating on Union Pacific (UNP) with a $328 price target, suggesting a 10% upside from the Oct 22 close. The company reported a 6% YoY increase in carloads and a 13% rise in domestic intermodal volumes, with expectations of continued growth. UNP maintains a high-single digit EPS growth outlook for 2026, citing operational efficiency and pricing power.

Union Pacific (UNP) reported Q3 earnings of $3.53 per share, beating estimates, with revenue up 15.3% to $7.20 billion. The company raised its dividend to $1.42 per share, covered by strong cash flow. Management expects continued dividend growth and pricing improvements. The pending Norfolk Southern merger may impact buybacks and debt levels.

CSX, Union Pacific, and Norfolk Southern reported record Q3 revenue due to high diesel prices shifting freight to rail. CSX saw $4B revenue (+12% YoY), Union Pacific $7.2B (+15%), and Norfolk Southern $3.5B (+14%). Intermodal volume grew significantly, but pricing benefits await 2027 contract resets. Fuel surcharges drove revenue growth, with diesel prices nearing all-time highs.

Norfolk Southern reported a 14% year-over-year revenue increase to $3.53 billion in Q3, driven by higher fuel surcharges and volume growth. Operating expenses rose 19% to $2.38 billion, leading to a 5% increase in operating income. The company revised its 2026 adjusted operating expense outlook to $9 billion. Norfolk Southern and Union Pacific are awaiting regulatory approval for their planned merger.

Union Pacific (UNP) reported Q3 freight revenue ex-fuel at $5.6B, up 6%. Intermodal and industrial markets led volume growth. Bulk revenue rose 10%, industrial 14%, and premium 21%. The company expects stronger pricing and double-digit international intermodal growth in Q4. Operational metrics improved, with higher freight-car velocity and lower terminal dwell.

Union Pacific reported Q3 2026 earnings with 6% volume growth and an 110 basis point improvement in core operating ratio. Intermodal traffic drove growth, and the company affirmed high single-digit EPS growth for 2026. Capital expenditure was increased to $3.5 billion. The Norfolk Southern merger is expected to close in 2H 2027, with management expressing high confidence in approval. Higher fuel prices and coal volume declines were noted as headwinds.