Fuel costs surge 69%, eroding profit margins: Union Pacific (UNP.US) Q3 revenue hits record but fails to mask cost concerns.

On Thursday, October 22, before the U.S. stock market opened, U.S. western rail giant Union Pacific (UNP.US) released its third-quarter 2026 financial report. The report showed that the company achieved operating revenue of $7.197 billion in Q3, up 15% year over year, exceeding the market expectation of $7.03 billion and setting a record; adjusted diluted EPS was $3.53, up 15% year over year, above the analyst consensus of $3.48. The report showed that Q3 net profit was $2.076 billion, up 16% year over year; diluted earnings per share (EPS) were $3.49, up 16% year over year; operating income reached $2.943 billion, up 15% year over year; the operating expense ratio was 59.1%, improved by 0.1 percentage point year over year, and 58.8% on an adjusted basis. It is worth noting that the average price of locomotive diesel this quarter reached $4.21 per gallon, soaring 64% year over year, and fuel expenses reached $1.04 billion, surging 69% year over year, dragging down the operating expense ratio by about 140 basis points, but improvements in core operating efficiency still helped the metric hold the 60% threshold. By business segment, freight revenue reached $6.813 billion, up 15% year over year, and up 6% year over year excluding fuel surcharges; total carloads were 2.293 million, up 6% year over year; average revenue per car was $2,971, up 8% year over year. Among them, intermodal performed most strongly, with revenue surging 27% year over year to $1.517 billion and container volume up 11% year over year; industrial segment revenue rose 14% year over year, and bulk segment revenue rose 10% year over year. In terms of operating efficiency, labor productivity improved 5% year over year, fuel consumption rate improved 2%, freight car velocity reached 228 miles per day, up 1% year over year, and average terminal dwell time was 19.9 hours, improved 2% year over year. At the macro level, the situation in the Middle East [GEO Group Inc] pushed diesel prices persistently high, becoming the biggest pressure item on the cost side; but at the same time, high diesel prices amplified the cost advantage of rail relative to trucking, and the high growth of intermodal is reflecting the structural trend of "truck-to-rail conversion." Company management said that although macroeconomic forecasts are mixed, the 6% growth in freight volume shows that demand remains resilient. Performance guidance Union Pacific maintained its full-year reported EPS guidance of "high single-digit" growth, consistent with its three-year compound growth target of "high single-digit to low double-digit" growth by 2027; the capital expenditure plan was raised to $3.5 billion. Company CEO Jim Vena said: "The third-quarter results demonstrate our ability to safely deliver the service customers need while efficiently handling a 6% increase in volume. We look forward to the next steps in the U.S. Surface Transportation Board (STB) merger review, delivering to customers the value of America's first transcontinental railroad." In addition, the company declared a quarterly dividend of $1.42 per share, up 3% year over year.